As the federal government and 49 states signed a landmark mortgage relief settlement Thursday, housing advocates and others pointed to shortcomings and raised questions about how the $25 billion plan would be able to provide relief to nearly 2 million current or former homeowners across the country.

The nation's five largest loan servicers agreed to provide mortgage reductions, refinancing and other loan modification help to homeowners hurt by the housing collapse. Maryland is expected to receive nearly $1 billion, the sixth-largest share of the total amount, because it was among the states hardest hit by the wave of foreclosures, state Attorney General Douglas F. Gansler said.

Federal and state officials promoted the settlement as a significant step in holding the banks accountable for abusive and illegal foreclosure paperwork practices — and as one that will provide much-needed relief to struggling homeowners.

"This is the beginning, not the end, for banks to step up to the plate and take real responsibility for their role in the housing crisis," said Marceline White, executive director of the Maryland Consumer Rights Coalition, who called the settlement a balancing act between getting help for homeowners now or at some point in the future.

"It's important to maybe toast this as a first step [but] not certainly pop open the champagne," she said.

Other housing advocates and real estate experts said the settlement money represented a mere sliver of the $700 billion in negative equity in the nation's housing market. In Maryland, nearly one in four homeowners with a mortgage owed more on their loans than their homes were worth this past fall. That's about 315,000 Marylanders with "underwater" homes, according to real estate data firm CoreLogic.

"Will $1,800 to $2,000 help homeowners? It's chump change," said Sharon New, a food and health educator from Annapolis who was referring to the amount borrowers may receive under the settlement. New was part of a local effort pushing Gansler not to sign on to a deal that gives banks any immunity from liability for their actions.

Other critics of the deal noted that it excludes loans owned by government-controlled Freddie Mac and Fannie Mae — agencies that hold about half of the nation's mortgages.

"There have been many people affected by foreclosures, and we want to have as many of them as possible be in a position to take advantage of the settlement," said Rep. Elijah E. Cummings, a Baltimore Democrat who has been pushing the regulator of the housing giants Freddie and Fannie to write down the principal on underwater mortgages.

"That's the problem when you have most of the people coming under" Freddie and Fannie, said Cummings, who nonetheless called Thursday's deal a major step forward.

Neighborhood Assistance Corp. of America, a nonprofit housing counseling agency, said it, too, was disappointed that the agreement did not address government-owned or -issued mortgages, including those backed by the Federal Housing Administration and the Department of Veterans Affairs.

Reece Dameron, an attorney with St. Ambrose Housing Aid Center, Baltimore's largest nonprofit foreclosure-prevention organization, was concerned that some of its low- to moderate-income Baltimore clients would be ineligible for relief under the settlement because they hold FHA loans.

Still, Dameron said, the settlement money was a "new tool" that housing counselors could use to help homeowners at risk of losing their homes.

"In some cases, it will give us more leverage," said Dameron, noting that the five banks also agreed to new servicing and foreclosure standards under the settlement.

Of the $960 million that Maryland is expected to receive under the agreement, about $808 million would be used to pay for principal reductions and other mortgage relief.

An additional $64 million would be used for interest-rate reductions for borrowers who are up to date on their mortgage payments but still owe more than their houses are worth. Also, $62.5 million would be used to hire more housing counselors and for legal assistance.

The remaining $24 million would be distributed — in checks for $1,800 to $2,000 — to homeowners who lost homes to foreclosure.

Since January 2006, mortgage firms have foreclosed on about 49,600 homes in Maryland, according to CoreLogic.

The banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — along with settlement administrators and attorneys general will work together to identify eligible homeowners over the next six to nine months, according to officials.