Wells Fargo & Co. and eight state attorneys general announced an agreement on Wednesday in which Wells will expand principal reductions and loan modifications for underwater homeowners.

The deal will resolve without litigation those states' inquiries into the marketing of the loans in the $120 billion pool of option adjustable-rate mortgages that Wells acquired through its 2008 purchase of Wachovia Corp. Wells will pay $24 million to the states for borrower outreach and assistance, and has committed to making more than $700 million in principal and interest rate reductions to pick-a-pay mortgages.

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