Millions of people could have mortgage debt cut as America's top lenders agree deal over alleged abuses in housing market

• guardian.co.uk, Thursday 9 February 2012 09.40 EST

The agreement covers five banks: Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. Photograph: Shannon Stapleton/Reuters

US government officials are set to announce a $26bn settlement with the country's largest lenders over alleged abuses in the housing market. The agreement, to be announced by attorney-general Eric Holder and urban development secretary Shaun Donovan at 10am, will be the largest industry fine since a multi-state deal with the tobacco industry in 1998.

Federal and bank officials have been in negotiations over the deal for over a year. There had been speculation that president Barack Obama might announce the deal at his State of the Union speech in January.

But talks stalled as California and New York balked at the terms of the agreement. They have now signed off on the deal, which is now expected to cover at least 49 states.

The agreement covers five banks: Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. The five account for 55% of all outstanding home loans

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