Texas homeowners will share in $287 million of the landmark $26 billion multistate settlement over abusive practices at the five largest mortgage-servicing companies.
The state will also receive $141 million for violations of state law, bringing Texas' total share to $428 million, Attorney General Greg Abbott said Thursday.
Additional payments could be made to states and homeowners if nine more large loan servicers join the settlement, which could boost the total payout to as much as $45 billion over three years.
The settlement announced Thursday, the result of 16 months of painstaking talks, is part of a broad national effort to halt the housing market's downward slide and hold the banks accountable for foreclosure abuses.
Nearly 2 million current and former U.S. homeowners harmed by the bursting of the housing bubble could benefit from the payments, state and federal officials said in Washington.
The settlement is about "righting the wrongs that led to the housing market collapse," U.S. Attorney General Eric Holder said. "With this settlement, we recover precious taxpayer resources, fix a broken system and lay a groundwork for a better future."
Many industry analysts called the deal good news for the banks, because it removed a cloud hanging over the industry. They also said the five mortgage servicers in the agreement -- Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial -- had already set aside most of the money.
"I wouldn't say it's a panacea for the housing industry, but it is good for the banks to get this behind them," said Jason Goldberg, an analyst with Barclays.
Bank of America, until recently the nation's largest mortgage servicer, saw its shares inch up less than 1 percent Thursday, while the other banks saw small declines.
Despite the billions earmarked in the accord, the aid will help relatively few of the millions of borrowers who are delinquent and facing foreclosure. 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 expected.
Still, the agreement is the broadest effort yet to help the estimated 11 million borrowers who are "underwater" -- owing more than their houses are worth. Roughly 1 million expected to have their debt reduced by lenders or to refinance at lower rates.
About 750,000 people who lost their homes to foreclosure from January 2008 through 2011 will get checks for about $2,000.
Don Baylor, who tracks financial issues for the Center for Public Policy Priorities in Austin, said that besides the aid to those two groups, a third important element of the settlement "is the servicing reforms."
Mortgage-servicing companies collect payments from borrowers, direct the money to mortgage holders or investors, and handle homeowners who fall behind on their payment, including with foreclosure proceedings.
"They're the hidden cogs in the machine that got gummed up," he said.
The deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification.
Molly Rogers, staff attorney with Texas RioGrande Legal Aid, called the settlement "a slap on the wrist" but better than nothing.
She said it's not clear how many Texans will benefit from the provision that helps pay down the principal of homeowners who are underwater, noting that the state did not have the sharp run-up and collapse of home values seen in other states, like Nevada, Arizona and Florida.
Nationwide, about $5 billion of the settlement will be cash payments to states and federal authorities, $17 billion will be earmarked for homeowner relief, roughly $3 billion will go toward refinancing and a final $1 billion will be paid to the Federal Housing Administration.
Only Oklahoma did not participate in the settlement, reaching a separate agreement worth $18.6 million with the banks, according to a statement from Attorney General Scott Pruitt.
The amounts from individual banks depend on their share of the servicing market.
The biggest, Bank of America, will provide $11.8 billion, followed by $5.4 billion from Wells Fargo, $5.3 billion from JPMorgan Chase, $2.2 billion from Citigroup and $310 million from Ally. Bank of America will contribute an additional $1 billion for FHA loans.
Officials in Washington said the deal covers only the fallout for homeowners who defaulted. Regulators and prosecutors could still pursue questionable behavior in the process by which those loans were made, known as origination, and the packaging of those mortgages into securities sold to investors.
Shaun Donovan, the secretary of the Housing and Urban Development Department, said new servicing standards will "force the banks to clean up their acts," adding: "No more lost paperwork, no more excuses, no more runaround."
President Barack Obama said the government is "going to keep at it until we hold those who broke the law fully accountable."
Four million Americans have been foreclosed on since the beginning of 2007. Many communities are swamped with abandoned homes.
Other multimillion-dollar settlements were announced Thursday in connection with the years-long mortgage and foreclosure crisis:
A mortgage-servicing subsidiary of Bank of America Corp. agreed to settle Federal Trade Commission charges that it illegally assessed more than $36 million worth of fees against struggling homeowners, in violation of an earlier settlement with the FTC.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo also agreed to pay a penalty of $394 million as part of a settlement over foreclosure abuses, the Office of the Comptroller of the Currency said.
Staff writer Jim Fuquay contributed to this report, which includes material from The Associated Press and The New York Times.