Associated Press

PHOENIX — Arizona will get more than $1.6 billion to relieve underwater homeowners in settlements for two mortgage fraud lawsuits.

The state signed on late Wednesday night to a 49-state deal with the nation's biggest mortgage lenders over foreclosure abuses that occurred after the housing bubble burst.

Arizona Attorney General Tom Horne says that the state will get $1.6 billion as part of the national deal, which forces five major lenders reduce loans for about 1 million households and send checks of $2,000 to thousands of Americans who were improperly foreclosed upon.

In addition the national settlement, Horne says Arizona is set to get $10 million in a separate deal with Bank of America Corp.

The separate lawsuit accused Bank of America of misleading and deceiving homeowners who've tried to modify their mortgages, and alleged that the bank foreclosed on homes after assuring owners that their loans were being modified and they could continue to make payments.

Horne announced both settlements on Thursday morning.

Arizona is among the states hardest hit by homeowners who have defaulted on mortgages in the recent years as adjustable payments soared, people lost their homes and home values sank.

"We've been hit hard by the problems with mortgages, and this infusion of $1.6 billion dollars into that important part of our market, I think is not only important for the homeowners involved but for the entire Arizona economy," Horne said.

The state is getting the third-largest share of a $25 billion agreement between state attorneys general and Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial. It is the largest settlement involving a single industry since a 1998 multistate deal with the tobacco industry.

The 49 states agreed under the deal not to pursue civil charges against the companies for foreclosure abuses. Homeowners can still sue lenders on their own in civil court, and federal and state officials have the option to file criminal charges.

Many of the companies foreclosed upon homeowners without verifying documents, and some employees signed documents without reading them or used fake signatures to speed the process, which is also known as robo-signing.

The banks will have three years to fulfill the terms of the deal.

Horne said he decided early on that the national deal would help Arizona homeowners, but the state first had to reach an agreement in the separate lawsuit against Bank of America, the No. 1 loan servicer in Arizona.

That lawsuit was filed by Horne's Democratic predecessor Terry Goddard during his last days in office.

Nevada's Democratic attorney general filed a similar lawsuit with Bank of America, and they've also come to an agreement, Horne said Thursday.

Bank of America had criticized the two Democratic attorneys general at the time for filing 'go-it-alone' lawsuits while the national deal was ongoing.

Phone messages and emails to Bank of America for comment were not immediately returned.

The Bank of America agreement includes terms that the bank keeps one person on each loan. That would prevent someone from foreclosing on a homeowner who's still making payments because they've been told by someone else that their loan is being modified.

The deal also requires that an independent party notify struggling homeowners about the options available to them under the settlement to ensure they are able to take advantage of the deal.

It will also make changes to the way loans are processed, "hopefully to do away the abuses we've seen," Horne said.