A broad settlement with major banks over mortgage servicing abuses that would bring relief to distressed U.S. homeowners could be announced as early Thursday, two people familiar with the matter said.

Negotiators said a federal-state mortgage servicing settlement already has the backing of over 40 states but so far lacks the support of a handful of critical states, including California and New York.

The size of the settlement is estimated at up to $25 billion, but that could drop if a number of states stay on the sidelines.

New York Attorney General Eric Schneiderman had planned an announcement late Tuesday about the settlement but postponed it indefinitely without explanation.

Last Friday New York filed a lawsuit that conflicted with part of the settlement. His office has been in discussions with bank lawyers to move forward with both the lawsuit and the settlement, according to two other sources familiar with the matter.

According to another person familiar with Schneiderman's thinking, the tenuous nature of the talks caused the postponement. Schneiderman still is a holdout, that person said.

A decision from California Attorney General Kamala Harris also remained elusive, and her office had no comment on Tuesday.

Florida Attorney General Pam Bondi, who has been on the team of states negotiating the deal, has also not confirmed her participation in the deal.

Florida is active on the negotiating committee, and when we are able to speak publicly about the matter we will, Bondi told Reuters on Tuesday.

One state, Oklahoma, has officially declined to participate, according to one of the persons who said a national settlement could come as early as Thursday. Representatives of the state's Republican attorney general, E. Scott Pruitt, did not respond to requests for comment.

Some hard-hit states did make their support public on Tuesday. Michigan Attorney General Bill Schuette, for example, said in a statement he was joining the settlement.

Michigan expects to receive around $500 million in benefits under the deal, including $101 million that will go directly to the state to fund housing and foreclosure prevention efforts, he said.


Under the settlement, which state and federal officials have spent more than one year negotiating, top U.S. banks would resolve civil government claims about improper foreclosures and abuses in originating and servicing mortgage loans.

In exchange, the banks -- Bank of America , Wells Fargo & Co , JPMorgan Chase & Co , Citigroup and Ally Financial Inc -- would pay up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners.

States -- including California, New York and Delaware -- and several activist groups have criticized the terms of the proposed deal as too lenient toward the banks.

Two top concerns have been whether the settlement would prohibit state lawsuits that either had been already launched or were being considering, and whether attorneys general would get relief tailored to their state's needs.

Delaware's banking commissioner has come out in support of the deal, while the state's attorney general remains on the sidelines, for now.

Delaware stands to leave up to $40 million in homeowner relief on the table if it does not join the settlement, according to a letter from the state's banking commissioner seen by Reuters on Tuesday.


Delaware Attorney General Beau Biden, who is the son of U.S. Vice President Joe Biden, has said he opposes the settlement as it is drafted, and wants to make sure he can preserve his lawsuit against MERS, the banks' mortgage electronic registry, which he filed last year.

MERS is not a party to the settlement, but the proposed deal is expected in part to resolve claims against the banks for their use of MERS.

In a statement provided to Reuters on Tuesday, Biden's office said he continues to consider the terms of the settlement and advocate for improvements that address his concerns.

New York's Schneiderman also sued three of the banks last week accusing them of fraud in their use of MERS. That lawsuit is based on claims expected to be resolved in the settlement.

State attorneys general faced a Monday deadline to report whether they planned to support the settlement, but key states have not yet arrived at a decision.

Under a draft of the settlement, the banks would provide $17 billion in loan modifications for delinquent borrowers; $3 billion in refinancing for homeowners who are current on their payments but unable to refinance because they owe more than their homes are worth; and around $1.5 billion in direct payments of up to $2,000 each to borrowers who lost their homes to foreclosure, according to Delaware letter.

Participating states will also receive a total of $2.5 billion for housing programs.

(Reporting By Aruna Viswanatha in Washington, D.C., Karen Freifeld in New York and Rick Rothacker in Charlotte N.C., additional reporting by Michael Peltier in Tallahassee; Editing by Tim Dobbyn and Steve Orlofsky)