AP Economics Writer

WASHINGTON (AP) - Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can't afford their mortgages.

The three states' involvement buoys hopes that a full 50-state deal is imminent.

Formal announcements from Arizona and Florida could come within a week, according to the officials, who spoke on condition of anonymity because they weren't authorized to discuss the settlement publicly.

Arizona Attorney General Tom Horne said he first wants to resolve a separate foreclosure-related lawsuit his state filed against Bank of America.

Florida officials say they are still in discussions. Attorney General Pam Bondi "remains engaged in the settlement discussions in order to ensure that Floridians receive their fair share in the agreement," she said in a statement. Other officials said Florida intends to back the deal.

Michigan announced Tuesday it would join the settlement. Officials said the state would receive about $500 million in aid.

Michigan officials also said they would continue a criminal investigation into Docx, a unit of Lender Processing Services of Jacksonville, Fla. The company is accused of using fake signatures on phony foreclosure documents. Missouri filed criminal charges against the firm and its founder Friday, saying it falsified 68 notarized deeds on behalf of mortgage lenders.

The nationwide settlement stems from abuses that occurred after the housing bubble burst. Many companies that process foreclosures failed to verify documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures _ an action known as robo-signing.

The deal would be the biggest involving a single industry since a 1998 multistate tobacco deal. It would force the five largest mortgage lenders to reduce loans for about 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.

The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.

Five major states _ California, Delaware, Massachusetts, New York and Nevada _ are still considering whether to join the settlement. Massachusetts, which filed its own lawsuit against the five major lenders in December over deceptive foreclosure practices, has been quiet about its thinking.

But Massachusetts Attorney General Martha Coakley acknowledged last month she thought a deal between the banks and states would be reached and that she would keep an "open mind" as to whether Massachusetts would accept an agreement.

California still has "significant sticking points," but they may be settled in the coming days, said officials with direct knowledge of the negotiations. That represents progress from a few weeks ago, when California Attorney General Kamala Harris called the proposed settlement "inadequate." California officials walked away from the negotiating table altogether in September.

California's backing is particularly crucial. It was among the states hardest hit by the foreclosure crisis. And it has the most residents "underwater": They owe more on their loan than their home is worth. Without California's participation, the money available to homeowners nationally would be about $19 billion rather than $25 billion.

Homeowners in states that opt out of the deal wouldn't share in the settlement money. The money available to homeowners could run as high as $25 billion if all states approve the deal.

The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth. The lenders would also send checks for about $2,000 to hundreds of thousands of people who lost homes to foreclosure.

The five lenders _ Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial _ have already agreed to the settlement. In settling the charges, the states would agree not to pursue further investigations against the banks in civil court. The deal would not protect the banks from criminal investigations.

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Associated Press Writers Randall Chase in Dover, Del., Gary Fineout in Tallahassee, Fla., Michelle Price in Phoenix, Ken Ritter in Las Vegas, Donald Thompson in Sacramento, Calif., and Michael Virtanen in Albany, N.Y., contributed to this report.

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