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A year ago, banks admitted to abusing the foreclosure process, using fake signatures to power through foreclosure documents, a practice known as robo-signing. Now, five major banks and more than 40 state attorneys general have agreed in principle to a broad settlement that they say will help homeowners. But some states are holding out, negotiating for a better deal, including states like California and New York. Tonight, there are reports that hold-out states are close to a deal that would allow a settlement to be announced as early as tomorrow.

NPR's Yuki Noguchi joins us now. And, Yuki, tell us, what is this proposed settlement, and who and what it covers.

YUKI NOGUCHI, BYLINE: Well, it's a deal that will extract some penalties from the banks, about $25 billion, if all states sign on. In exchange, banks will get what's known as a release, sort of like an immunity, from lawsuits over their handling of home loans.

CORNISH: So, who actually benefits from the money that the banks will pay? Where would it go?

NOGUCHI: Well, most of the money, $20 billion of it, would go toward writing down principal payments for homeowners who were not foreclosed upon, but who are struggling now. There could be a million such homeowners eligible. And the way that would work is that the banks would have targets they have to meet, in terms of what kinds of loans they would have to modify. But the banks would still have a lot of discretion in who gets what.

Oh, and there's another $5 billion in cash, part of which would go to the states to help fund homeowner assistance programs. And some of which would go to homeowners who may have been wrongfully foreclosed upon. And for them, it's up to $2,000 each, which is not a lot if you lost your house.

CORNISH: Yeah, I mean, so play this out for me. Let's say I'm underwater on my home, meaning my home loan is more than what my house is actually worth. Can I still get help from this and could I still refinance?

NOGUCHI: Well, basically banks have a menu of options they can choose from. They can help someone like you refinance in that scenario. And they might be able to write down your principal or forgive a home equity loan you might have. And they get a certain amount of credit towards that $20 billion target. And if they don't meet that target, there are still penalties they'll have to pay.

CORNISH: Now, California and New York are states that at times have really been concerned about these negotiations, in part because they're saying that the banks could potentially get too much immunity in exchange for this deal. And is that still an issue here?

NOGUCHI: Yes, but that difference is narrowing and banks would still get pretty broad immunity with the settlement. If all the states sign on, banks will not face suits about how they originated these loans - any sort of subprime or predatory lending practices. And also, this would cover them against any suits regarding that robo-signing issue, where mortgage companies signed false affidavits in order to speed up the foreclosure process, which was what started this whole process in the first place.

CORNISH: OK, Yuki. So then let's talk more about the states that are holding out. I know Massachusetts and Delaware are on that list. What's the deal?

NOGUCHI: A lot of these states weren't happy with the entire process. They said they wanted to do full investigations to gauge the full extent of the possible fraud, before even starting negotiating a settlement. But now they worry that the settlement could tie their hands. Some have cases pending against the banks already, under various state laws, and they want to make sure this doesn't shortchange that. California is, of course, big and they have a lot of clout. And right now, that state is pushing for more ability to enforce the provisions in this settlement.

At root, if you had to boil it down, the criticism of this settlement is this: It doesn't demand a structural change in how the banks handle troubled mortgages. And banks will still get to call a lot of the shots.

CORNISH: So then, is the settlement actually expected to solve the country's mortgage problems in any way?

NOGUCHI: Well, that was really the hope and some will probably benefit. But a lot of people say on a large scale this won't be that fix. You've seen a lot of variations on mortgage modification programs that have tried to get banks to fix the housing problem. And so far, it just hasn't worked on a grand scale. As one person said to me, this settlement is a slap on the wrist to the banks. It's not a fix for the housing problem.

CORNISH: NPR's Yuki Noguchi, thanks so much for explaining.

NOGUCHI: Thank you, Audie.

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