(Image source: Wikimedia Commons)

BY ZACH TOOMBS

Five of the country’s largest banks and an assortment of state attorneys general have agreed to a $26 billion settlement surrounding the mortgage meltdown. According to Bloomberg, the deal would provide relief for about two million current and former homeowners hurt when the housing bubble burst.

“Here’s what it would have. $17 billion in mortgage debt forgiveness and loan modifications. $3 billion for refinancing. $1.5 billion to be distributed between 750,000 borrowers who’ve lost their homes to foreclosures.”

U.S. Attorney General Eric Holder announced the settlement Thursday morning and cited big banks’ mortgage malpractice as the reason behind the deal.

“Our investigations revealed disturbing practices. For instance, we saw that, all too often, services pushed borrowers into foreclosure, even though federal regulations require servicers to try other alternatives first.”

CNN reports the settlement hinged on an agreement from a handful of large holdout states that finally came around Wednesday night.

“California, New York, Florida — they are now on board. Almost all the states on board, so that’s important. The attorneys general of these states didn’t want to give up their investigations into the banking industry, and they won’t have to.”

But The New York Times says the plan leaves many victims of banks’ bad practices without aid.

“Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.”

In all, the plan helps roughly one million of the nation’s 11 million underwater homeowners. But a Fox News wonders why any should be receiving aid at all.  

“I have a real problem with bailing out anybody, even homeowners. If you bought a home and you couldn’t afford it, OK. And now we’re basically creating this moral hazard that the government’s backing you up, even if you can’t afford it.”

And while some criticize the deal, the Los Angeles Times says, it was the right deal -- for now.

“... this settlement comes at the middle of the story, not the end. Settling this piece enables the states to move on to other problems in the housing market, most notably the way mortgages were bundled, sliced, diced and sold to investors.”

The agreement would mark the nation’s largest industry-government settlement since the big tobacco settlement in 1998. The five banks targeted include Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup.

But The Washington Post reports:

“The settlement could grow in size and scope if officials can sign on an additional nine mortgage servicing companies with which they have been negotiating in recent weeks. That would bring the total number of banks participating to 14, and could raise the face value of the settlement to about $30 billion.”

Bloomberg believes President Obama could also see political gain out of this plan. The latest state to sign on to the Obama administration’s deal: Florida -- sure to be a political battleground state come November.