Government and banks reached record housing settlement of more than $26 billion

State and federal government officials on Thursday announced a record housing settlement of more than $26 billion with five of the country's biggest banks over foreclosure abuses after more than a year of negotiations. The deal is expected to help more than one million U.S. homeowners.

For more than a year state attorneys-general and federal officials have been in discussions with banks over the robo-signing crisis - the practice of assigning bank employees to rapidly approve numerous foreclosures with only cursory glances at the glut of paperwork to determine if all the documents are in order. In the end, 49 states participated in the settlement, including California and New York which had previously held out for a better deal.

The settlement is with five big banks: Bank of America Corp., J.P. Morgan Chase & Co., Citigroup Inc., Wells Fargo & Co., and Ally Financial Inc., the company formerly known as GMAC.

Of the $26 billion in the deal with the five banks, $17 billion must be spent by the banks to assist struggling homeowners. Of that amount, 60% must be employed to reduce the amount owed by troubled borrowers, known as principal reduction. The amount must be spent within three years, or banks will need to make cash payments to regulators.