A complex and controversial legal battle over the way banks foreclosed on thousands of U.S. homeowners moved a step closer to resolution Thursday, as state and federal officials announced an agreement that may be worth $25 billion or more with five major banks. .

The deal reduces the amount of money some homeowners owe to banks, provides cash payments to some victims of wrongful foreclosures, and sets up a system to help some people refinance loans at lower interest rates.

The scandal erupted when it was learned that many companies that process foreclosures failed to verify documents, had employees sign papers they had not read, or used fake signatures to speed foreclosures.

U.S. Attorney General Eric Holder said numerous investigations revealed “disturbing” practices in the mortgage industry. He says the agreement establishes new standards that will help prevent future abuses.

This is the largest government-industry settlement since a multistate deal with the tobacco industry in 1998.