The remainder, about $4bn-$4.4bn in cash, could be designated for the states, which then would divide the proceeds to fund a variety of programmes, including assistance to borrowers.

About half that amount could be used to pay up to $2,000 to an estimated 1.1m aggrieved borrowers who allege they were harmed by improper practices.

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Talks on US mortgage abuses hit key stage

By Shahien Nasiripour in New York

The largest US mortgage servicers will meet federal and state officials in Washington on Friday to try to reach a settlement over allegations that the banks broke federal rules and state laws in their treatment of distressed borrowers.

But the meeting is clouded by continued squabbling between the states as to the size and scope of penalties to be paid by the banks for their alleged failings in processing foreclosures.

The Illinois attorney-general estimated that in a final accord, Bank of America would pay $7.8bn, more than Wells Fargo and JPMorgan Chase combined, according to an internal document prepared by the state described to the Financial Times.

JPMorgan would pay $3.8bn, while Wells could pay about $3.5bn, according to people familiar with the document. Citigroup would be asked to pay about $1.4bn and Ally Financial, which is 73.8 per cent owned by the US Treasury, would pay $860m.

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