The U.S. states hardest hit by the housing collapse will decide today whether to sign off on a potential $25 billion settlement with America's biggest lenders, the largest industry fine since 1998's massive multi-state agreement with the tobacco industry.

Government officials have been trying for over a year to negotiate a settlement with states to agree to a package of loan write-downs, refinancings and other homeowner assistance, as well as cash penalties for some of the U.S.'s largest lenders.

California, the state with the most homeowners now in negative equity, quit talks last year but is now back in negotiations. The multi-state deal deadline is today.

New York attorney general Eric Schneiderman, another former critic, has also signaled that he may now be willing to sign off on an agreement. President Barack Obama recently appointed Schneiderman to head a new financial crimes unit dedicated to investigating and prosecuting financial fraud.

The banks – led by the five biggest mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – hope a deal will put a halt to a series of lawsuits and investigations into alleged abusive practices by several states including so-called "robo-signing" where banks foreclosed on borrowers without proper paperwork or process. Four million families have lost their homes to foreclosure since the beginning of 2007.