Who benefits from possible $25B mortgage settlement?

— -- After nearly a year of negotiations, federal and state officials and major mortgage servicers are moving closer to amultibillion-dollar settlement over alleged foreclosure and mortgage loan-servicing abuses. A deal could be finalized by early February, some officials say, although that's not a certainty. And its terms could change.

Based on interviews with officials on both sides of the negotiations, USA TODAY reporter Julie Schmit explains what a potential settlement might include and what it's likely to mean for borrowers and the housing market.

Q: What could a deal be worth?

A: It's expected to range from $17 billion to more than $30 billion, but that will depend on how many state attorneys general sign on to it and how many servicers are part of it.

The five biggest servicers, Bank of America, JPMorgan Chase, Citibank, Wells Fargo and Ally Financial, are in. Smaller ones are expected to join later.

California, the state with the most foreclosures, said last week that the proposed deal isn't good enough. If California eventually supports a deal covering the five biggest servicers, a settlement is likely to hit $25 billion.

Q: How might $25 billion be spent?

A: Terms could change, but the pot is likely to include:

•$17 billion for loan modifications. About 60% would go to reduce what people owe on their home loans. Other funds would be used to assist short sales, in which lenders agree to let borrowers sell homes for less than they owe, and to give unemployed borrowers a reprieve from making mortgage payments.

•$3 billion to help homeowners refinance at about a 5.25% rate.

•$5 billion in cash. About $1.35 billion would be distributed by states to eligible borrowers who were victims of loan-servicing abuses by one of the five servicers and lost their homes in foreclosure in 2008 through 2011. The rest would fund state and federal housing initiatives.

Q: Will I have to prove I was hurt by a servicer's misconduct?

A: Probably not. The five servicers will provide a list of people who lost homes in 2008-11, and they'll be contacted. Borrowers will likely have to attest to having suffered a loan-servicing abuse.

Q: If I take this payment, could I still sue if I felt I was wronged?

A: Yes, either as an individual or as part of a class action. It's also possible you could get restitution from a national review of foreclosures underway among 14 large servicers, including these five. That review is being overseen by federal banking regulators.

Specific amounts of compensation have not been announced. Find more information at this website: www.independentforeclosurereview.com.

Q: Who will get principal reductions?

A: Borrowers would have to be at least 60 days late on their mortgages as of a date that's yet to be determined. They would also have to be underwater, meaning they owe more on their home than it's worth.

And their state and servicer would have to be participants in the settlement.

Q: Who won't have any chance of a principal reduction?

A: That would be most borrowers, including anyone current on a mortgage and people with loans owned or guaranteed by a government entity, including Freddie Mac, Fannie Mae or the Federal Housing Administration. They hold about 56% of existing home loans, says magazine Inside Mortgage Finance.