North Carolina Bank Commissioner Joseph Smith will serve as a monitor to make sure the nation’s largest banks abide by the terms of a multibillion-dollar settlement over widespread foreclosure abuses, people familiar with the negotiations said.

The deal, which could be finalized in a matter of days, would force banks to overhaul their mortgage servicing practices and alter the way they deal with troubled borrowers seeking to stay in their homes.

It could also result in as much as $25 billion in penalties going toward foreclosure prevention measures and compensation for borrowers who suffered from banks’ flawed and fraudulent foreclosure practices.

President Obama nominated Smith in November 2010 to lead the Federal Housing Finance Agency, which oversees government-backed mortgage giants Fannie Mae and Freddie Mac.

But Smith’s nomination failed after Senate Republicans — primarily Richard C. Shelby (R-Ala.) — refused to confirm him.

Smith later was reappointed as bank commissioner in North Carolina, a job he has held since 2002.

People familiar with the negotiations, who spoke on the condition of anonymity because the deal remains unfinished, said Smith would have to resign as North Carolina’s commissioner of banks and take on the monitor role full time.

The new position will be paid for by the banks under the terms of the pending settlement.