The Obama administration has announced this morning a $26 billion fraud settlement with five of the nation’s banks over their flawed and fraudulent foreclosure practices Here’s what you need to know about it:

New York Attorney General Eric Schneiderman, accompanied by Attorney General Eric Holder, speaks at the Justice Department in Washington, Friday,Jan. 27, 2012, after Holder announced the formation of the Residential Mortgage-Backed Securities Working Group. (Cliff Owen/AP)

Meanwhile, attorneys general from Iowa, MarylandNorth Carolina, Delaware, Texas, and other states were calling for broader foreclosure moratoriums in their states until the banks ironed out the mess. On Oct. 13, 2010, attorneys general from all 50 states announced that they were joining together to launch a probe into the fraudulent or mishandled documents.

How many homeowners will be helped by the settlement? About 1 million households will have the size of their home loan reduced. An additional 750,000 families or individuals who lost their homes to foreclosure will receive checks for about $2,000 each. Those who receive these restitution payouts do not give up their right to participate in future lawsuits.

What banks are involved in the probe? Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup.

Could that change? Yes, and the Obama administration hopes it does. The settlement could grow if officials can sign on nine other mortgage servicing companies that they have been negotiating with in recent weeks. That could bring the total number of banks participating to 14, and raise the value of the settlement to about $30 billion.

The deal is currently worth $26 billion. Is that really a lot of money? Depends what you mean by “a lot of money.” The deal is the largest of its kind since a multi-state agreement with the tobacco industry in 1998. But that deal was worth around $350 billion in today’s dollars. It’s also not a lot of money compared to the $700 billion in underwater mortgage debt, or the bailout of the banks that issue and bought the debt in the first place.

The settlement increased in size thanks to the participation of California and New York’s attorneys general, who had been holdouts. However, some critics say the amount is relatively paltry, given the extent of the nation’s housing crisis.

What’s in it for the banks? The banks have been operating under a cloud of legal uncertainty over their exposure to bad mortgages that were not properly documented. That has hurt banks’ stock prices and tied up capital. As part of today’s deal, officials have promised not to pursue certain mortgage-related claims against the targeted banks.

So are they off the hook entirely? No. One reason the deal is relatively small is that it doesn’t fully end the banks’ legal liability. New York AG Eric Schneiderman, for instance, is able to move forward with his lawsuit.

Is this a gamechanger for the housing market? No. The effects of this deal are likely to be rather modest. In terms of direct help for consumers, the aggregate impact will be quite minor.

For more: Here’s the official Web site of the settlement. Here’s the press release from the Justice Department. Here’s the Washington Post’s story on the settlement. Here are five things that Slate’s Matthew Yglesias thinks you should know. Here are 12 reasons Yves Smith thinks you should hate the deal.

Related content:

How the settlement affects consumers

D.C. homeowners eligible for $40 million

Obama: ‘Need to keep doing everything we can to help homeowners’

Timeline of events: Foreclosure settlement