US banks agree $25bn mortgage settlement
|Bank of America is among those involved in the |
The deal, struck with the US government and most US states, follows allegations of abusive practices by lenders during the country's housing collapse.
The banks involved are Bank of America, Citigroup, Wells Fargo, JP Morgan Chase and Ally Financial.
President Barack Obama said that homeowners were not treated fairly.
"Many companies that handled these foreclosures didn't give people a fighting chance to hold on to their homes," Mr Obama said.
"In many cases they didn't even verify that these foreclosures were actually legitimate."
The settlement follows a year of wrangling and is the biggest struck between the US government and a single industry since 1998.
The deal will cut loan payments for victims and provide compensation.
Homeowners will each receive $2,000.
The abuses happened after the US housing bubble burst five years ago.
Many companies processing foreclosures - or repossession orders - failed to verify documents.
By settling, the five banks will avoid civil lawsuits.
All US states except Oklahoma were involved in the agreement.
Attorney General Eric Holder said the deal represented the "latest step forward in righting the wrongs that led to our nation's housing-market collapse and economic crisis."
Californian borrowers will recieve almost half of the $25bn settlement, which does not include mortgages originated by the giant mortgage backers, Fannie Mae and Freddie Mac, which together make up the bulk of home loans in the US.
California's Attorney General, Kamala Harris, said she would try to reach a deal with the two lenders.
She said: "I will continue to fight for principal reductions for the approximately 60% of California homeowners whose loans are owned by Fannie Mae and Freddie Mac."