A $25 billion pact with banks could also pay foreclosure victims.
About 1 million homeowners facing foreclosure could have their mortgage burden cut by about $20,000 each as part of a long-awaited deal taking shape among state attorneys general, federal officials and the nation's largest mortgage servicers.
But a final agreement remained out of reach Monday despite political pressure from the White House, which has been pressing to have a deal in hand that President Obama could highlight in his State of the Union address Tuesday night.
The housing secretary, Shaun Donovan, met Monday in Chicago with Democratic attorneys general to iron out the remaining details and to persuade holdouts to agree with any eventual deal. He later held a conference call with Republican attorneys general. But as he renewed his efforts, Democrats in Congress, advocacy groups like MoveOn.org and several crucial attorneys general said the deal might be too lenient on the banks.
The agreement could be worth about $25 billion, state and federal officials with knowledge of the negotiations said, with up to $17 billion of that used to reduce principal for homeowners facing foreclosure. Another portion would be set aside for homeowners who have been the victim of improper foreclosure practices, with about 750,000 families receiving about $1,800 each. But bank officials said Monday that the total amount of principal reduction and reimbursement would depend on how many states eventually sign on.
The government and bank officials spoke only on condition of anonymity because the discussions were continuing.
Tom Miller, the attorney general of Iowa, said Monday that an agreement with the nation's five largest mortgage servicers -- Bank of America, J.P. Morgan Chase, Citigroup, Wells Fargo and Ally Financial -- would not be reached "anytime this week."
But Minneapolis-based U.S. Bank has confirmed that it's one of the banks beyond the big five that have been invited to participate in the settlement and that it took a $130 million fourth-quarter charge related to the matter.
Minnesota Attorney General Lori Swanson, who has publicly opposed a broader settlement with the five banks, was noncommittal Monday about signing on.
"We're going to have to very closely analyze the details," spokesman Ben Wogsland said.
Wogsland said the office had "a couple of staff attorneys" in Chicago on Monday listening to briefings from lead negotiators from the U.S. Department of Justice and Department of Housing and Urban Development.
Minnesota has had 66,600 homes go back to the bank since December 2007, though it's unclear how many would fall under the conditions of the settlement.
Swanson was part of a group of attorneys general who met in Washington this month to discuss ongoing and future investigations into mortgage finance and foreclosure abuses.
In September Swanson wrote a letter to Iowa Attorney General Tom Miller, New York Attorney General Eric Schneiderman and U.S. Associate Attorney General Thomas Perrelli, saying that any multistate foreclosure settlement should have "teeth." Any settlement shouldn't release banks from liability for conduct that hasn't been investigated and shouldn't compromise the due process rights of any individual citizens, she said.
In that letter Swanson described Minnesota as a state that is "both participating in the multistate group and conducting independent investigations into certain aspects of this activity."
Wogsland on Monday would neither confirm nor deny whether the office has any investigations into foreclosure abuse underway.
U.S. Bank CEO Richard Davis told industry analysts in an earnings call last week that the $130 million set-aside related to the settlement doesn't mean the bank has made a final decision regarding its participation. The bank wouldn't discuss the issue Monday.
The mortgage boom and eventual bust so far has led to foreclosure proceedings against roughly 8 million Americans. About 11 million more own homes that are "underwater," meaning the amount of money owed now exceeds the value of the home. They owe, on average, $45,000 to $50,000 more than their home is worth, according to Mark Zandi of Moody's Analytics.
Star Tribune staff writer Jennifer Bjorhus contributed to this report.