WASHINGTON — Florida, Arizona and Michigan, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can't afford their mortgages.
The three states' involvement buoys hopes that a full 50-state deal is imminent with the nation's five biggest mortgage lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
Formal announcements from Arizona and Florida could come within a week, according to the officials, who asked not to be identified by the Associated Press because they aren't authorized to discuss the settlement publicly.
Florida officials say they are still in discussions. Attorney General Pam Bondi "remains engaged in the settlement discussions in order to ensure that Floridians receive their fair share in the agreement," she said in a statement. Other officials said Florida intends to back the deal.
Arizona Attorney General Tom Horne said he first wants to resolve a separate foreclosure-related lawsuit his state filed against Bank of America.
Michigan announced Tuesday that it would join the settlement. Officials said the state would receive about $500 million in aid.
Michigan officials also said they would continue a criminal investigation into Docx, a unit of Lender Processing Services of Jacksonville. The company is accused of using fake signatures on phony foreclosure documents.
The nationwide settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — an action known as robo-signing.
The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.
The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.
Five major states — California, Delaware, Massachusetts, New York and Nevada — are still considering whether to join the settlement. California's backing is particularly crucial. It has the most residents who owe more on their loan than their home is worth.