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Utah is receiving an estimated $171 million in money, reductions in mortgage principals and loan modifications as its portion of a sweeping $25 billion deal struck by 49 states and the federal government with five of the largest U.S. banks.

Many Utah homeowners who lost their homes to foreclosure over the past four years will get about $2,000 apiece in compensation. Those who are being foreclosed on or whose loan is for more than their home is worth (known as being underwater) could receive reductions in principals of their loans, modifications of the terms or forgiveness of penalties.

Others who can't afford payments even with a modification could be allowed short sales for less than the worth of their loans or "cash for keys" deals that allow them to walk away.

At a Thursday morning news conference to announce the Utah portion of the settlement, Gov. Gary Herbert and Attorney General Mark Shurtleff called the deal "historic" and second only to the state's portion of the 1998 settlement with tobacco companies over health care costs that was to bring Utah $1 billion over 25 years.

"It's not a good day from the standpoint we have victims out there, people who are hurting, and people have been unethical in behavior and fraudulent in behavior," the governor said. "But the good news here is we've taken action to remedy the problem."

The state will get about $23 million in cash from the deal, a portion of which Herbert said he wanted the Legislature to allocate to homeowner education and counseling. Only Oklahoma held out among states in signing on to the $25 billion deal to settle abusive foreclosure practices.

The settlement is being ratified through a lawsuit in the District of Columbia over fraudulent and improper foreclosure practices that in Utah included foreclosing on properties after inducing a homeowner to miss payments in order to try to qualify for a loan modification. Thousands of Utah homeowners also have been frustrated because banks that service loans have been highly dysfunctional and disorganized when working with homeowners.

The five banks are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (previously GMAC).

The $2,000 payments are for the loan customers of the banks who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2011. They and others who are facing foreclosure or are underwater — about 23 percent of Utah homeowners now owe more than the worth of their dwelling — should contact one of the five banks that serviced their mortgage in order to find out details and get the process rolling for their part of the settlement.

More than 50,300 Utah homes were auctioned off in foreclosures from 2008 through 2011, according to RealtyTrac, a real estate information company.

Shurtleff said the settlement avoided years of uncertain litigation but does not preclude homeowners from seeking their own remedies through courts or the state from pursuing criminal prosecutions. The settlement was balanced in sanctioning the banks but not hurting the country financially, he said.

"If you take [banks] down, it would be economically disastrous. What we want to do is reach that balance where it does hurt, it does sting and where they are being held accountable."

Afton January, foreclosure prevention coordinator for the Utah Housing Coalition, praised the deal but said some homeowners will be disappointed.

"If you lost your home, your school, your church, your credit score, $2,000 is going to feel a little bit disappointing," she said. "I can understand that. But to those folks who are underwater or facing foreclosure who want a modification or to refinance, this is a great day."

The Legislature should appropriate some of the money for HUD-approved housing counselors, said January.

Despite the billions of dollars involved in the settlement, it doesn't come close to addressing the holes in the U.S. economy caused by the bursting of the housing bubble, said Chris Peterson, a University of Utah law professor who is a legal expert on foreclosures.

"The thing I think is important to understand is the size of this is nowhere big enough to fill in the hole in our national economy, where consumers owe more on their homes than they're worth," he said. "That's at least $700 billion."

Lindon resident Melvin Olsen, who has been trying for months to reach a loan modification agreement with Bank of America, agreed.

"I think this agreement is extremely small compared to the trillions of dollars' damage to counties, homeowners, investors and, indeed, the entire economy of not only the United States but to the world caused by the housing collapse," he said in an email.

Olsen also said he was frustrated with the Attorney General's Office for failing to enforce a 2010 agreement with Countrywide (now owned by Bank of America) that called for loan modifications for Utahns.

Thursday's big nationwide settlement came about after months of negotiations between state attorneys general and federal agencies and the banks.

Assistant Attorney General Wade Farraway, who represented Utah in the negotiations, said talks also are ongoing with nine other banks, and he expected a settlement with them that would add to the first one.

The first five banks represent about 60 percent of loans in Utah, while the next nine are about 20 percent, he said. The final 20 percent are mostly state banks and credit unions that followed state laws in any foreclosures, Farraway said.

He also said the state is pursuing criminal investigations of fraud related to the five big banks or their agents.

"There are some criminal complaints that obviously we can't address right now that we're investigating, " Farraway said. Twitter: @TomHarveysltrib —

How the deal will affect individuals

• Five major banks will reduce loans for nearly 1 million U.S. households.

• The settlement applies only to privately held mortgages issued from 2008 through 2011

• The banks will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon.

• The accord will make it easier for those at risk of foreclosure to make payments and keep their homes —

More information for homeowners

• Bank of America: 1-877-488-7814

• Citi: 1-866-272-4749

• Chase: 1-866-372-6901

• Ally Financial (GMAC): 1-800-766-4622

• Wells Fargo: 1-800-288-3212

• Dial 211 to reach HUD-approved housing counselors