New York State will receive a guaranteed $136 million of the $2.7 billion hard cash settlement under a nationwide mortgage servicing agreement, and New Yorkers who fell victim to the foreclosure crisis will be eligible for an estimated $648 million in additional relief, officials said.

At the same time, the $25 billion federal-state settlement preserves New York’s right to pursue litigation against the Mortgage Electronic Registration System (MERS) and three of the nation’s largest banks, as well as actions that could arise from a continuing investigation, according to Attorney General Eric T. Schneiderman.

Mr. Schneiderman vowed that some of New York’s share of the settlement will “very quickly” go to restore legal service programs that have been cut back in recent years.

“If you don’t have a lawyer, it is hard to really put their feet to the fire and make sure the banks have every ‘t’ crossed and ‘i’ dotted if they want to foreclose on someone in New York,” Mr. Schneiderman said in a Feb. 9 phone interview. “We are going to make sure funding for those legal services is restored, that housing counseling and other programs to prevent people from being foreclosed on are adequately funded and we do believe we’ve obtained enough money in this initial settlement to provide those resources.”

Mr. Schneiderman, who for a year has held up negotiations between the banks and the nation’s attorneys general with his insistence that the settlement should not insulate banks from other investigations, said he signed off on the deal only after ensuring that the agreement would not let financial institutions off the hook for “the conduct that actually blew up the American economy.”

The settlement—in which the five largest mortgage servicers agreed to pay $25 billion to resolve a probe into foreclosure and loan servicing abuses—preserves state or federal criminal claims, securitization claims, violations of fair lending laws, tax claims, claims by counties for lost revenue, regulatory actions and other matters. The five mortgage servicers are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

The deal relieves the banks of liability for utilizing “robo-signed” affidavits in foreclosure proceedings, using deceptive practices in promoting loan modifications, filing improper documentation in bankruptcy court and failing to offer alternatives other than foreclosure before foreclosing on homeowners with federally insured mortgages, according to the U.S. Justice Department.

Mr. Schneiderman said the settlement is merely a “first step” toward broader relief that he will seek through President Barack Obama’s federal mortgage investigation unit, which he co-chairs.

“I am confident that this is just a down-payment” toward achieving three goals—”accountability, meaningful relief for homeowners and making sure all the facts get out so this never happens again,” Mr. Schneiderman said.

Russ Haven, counsel to the New York Public Interest Research Group, said it was crucial that the banks not receive blanket immunity.

“Schneiderman played a really important role by making sure the banks and their partners in the mortgage mess didn’t get broad releases,” Mr. Haven said. “Whether at a state or federal level you can still go after the industry for things like deceptive loan origination practices, and that is very important.”

The deal finally came together after the two major holdouts, New York and California, signed on. Only Oklahoma is not part of the agreement, and will not receive any of the settlement funds.

According to the Justice Department, the $25 billion agreement, which it characterized as “the largest joint federal-state settlement ever obtained,” requires the mortgage servicers to:

• Commit at least $10 billion to reducing the principal on defaulted or at-risk loans in which the borrower owes more on the mortgage than the house is worth.

• Dedicate at least $3 billion to refinance loans where the borrower is current, but owes more than the home is worth.

• Contribute up to $7 billion for other remedies, such as relief for unemployed borrowers.

• Pay $5 billion in cash to state and federal governments. Of that, $1.5 billion will be used to establish a fund to assist borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008, and Dec. 31, 2011. The remaining $3.5 billion will go to state and federal governments to recoup public funds lost as a result of misconduct.

New York’s share is $136 million in guaranteed recovery, plus an estimated $13 million in payments to victims of wrongful foreclosure, $140 million in benefits under a refinance program and $495 million in modifications to existing mortgages.

Mr. Schneiderman said New York has negotiated as part of its deal that banks will contact all homeowners who owe more on their mortgage than their house is worth and offer them an opportunity to renegotiate.

“We are going to work very closely with housing counselors, legal services and homeowners to make sure that happens,” Mr. Schneiderman said.

Jumana Bauwens, a spokeswoman for Bank of America, said the global settlement “will help provide additional support for homeowners who need assistance, brings more certainty to the housing market and aligns to our ongoing commitment to help rebuild our neighborhoods and get the housing market back on track.”

Leon Baer Borstein, a Manhattan attorney who has filed a federal lawsuit in New York against Deutsche Bank for alleged abuses, said the settlement, “while admirable and a positive step in the right direction,” will not in itself remedy the problem.

“It is a complex situation and probably requires multiple resolutions with many parties other than banks,” said Mr. Borstein, of Borstein & Sheinbaum. “Perhaps this settlement will open the path to such future resolutions.”

Separately, Eastern District U.S. Attorney Loretta E. Lynch said her office had reached an agreement with Bank of America and Countrywide Financial Corp. and its subsidiaries to pay $1 billion to resolve a claim her office has been pursuing since 2009.

Ms. Lynch said the agreement will result in an immediate $500 million to recover losses by the Federal Housing Administration. She said another $500 million will go into a three-year loan modification program for Countrywide borrowers.

The Bank of America, along with JPMorgan Chase, Wells Fargo and MERS are defendants in a complaint Mr. Schneiderman filed on Feb. 3 in Brooklyn (NYLJ, Feb. 6). The complaint alleges that banks use the MERS system to evade public filings, shortchange localities of $2 billion in fees and compromise the interests of homeowners.

MERS was created by the mortgage industry in 1993 to streamline the process and eliminate both the need to create and file documents that landed in the public domain and to pay filing fees. It acts as nominee and mortgagee of record for all the mortgages, and retains that authority no matter how many times the mortgage is transferred.

Mr. Schneiderman, along with attorneys general in Massachusetts and Delaware, is challenging the MERS system.