N.C. Commissioner of Banks Joseph Smith is stepping down from his post to focus on a new role: monitor of the $25 billion settlement between states and the country's largest mortgage servicers.

In that role, Smith, 62, will oversee banks to make sure they are complying with the terms of the agreement announced last week, and levy penalties if benchmarks are missed.

Smith's resignation is effective Thursday, the office of the N.C. Commissioner of Banks announced. Smith has been banking commissioner since 2002, and was appointed to another term last year.

Chief Deputy Commissioner of Banks Ray Grace will serve as acting commissioner until a permanent replacement is named by the governor and confirmed by lawmakers. The state banking commissioner regulates state-chartered banks, mortgage lenders and other financial institutions.

During Smith's tenure, state-chartered banks have grown to more than $250 billion in assets. He has issued enforcement actions that resulted in $30 million in restitution to consumers in the last four years.

"For a decade, Joe has served North Carolina as a staunch defender of consumer rights and a firm but fair regulator of banks and financial institutions," Gov. Bev Perdue said in a statement. "He played a critical role in eliminating the abuses of payday lending, strengthening anti-predatory lending and fighting abuses in mortgage lending."

The long-awaited settlement with Bank of America Corp., Wells Fargo & Co., and three other mortgage servicers resolved claims that they engaged in shoddy mortgage servicing and foreclosure practices like "robosigning," or signing batches of documents without reading them.

More than $17 billion will go to principal reduction and other foreclosure-relief measures for underwater borrowers in default or at risk of default. Underwater means the borrower owes more on the home than it is worth.

North Carolina will receive $338 million, more than half of which will go to foreclosure relief. South Carolina will get $33.8 million, the state attorney general's office announced. Of that, $1 million will go to foreclosure prevention and education, but the office did not provide any further breakdown of where the money will go.

Smith's role as monitor will last three years. He will provide periodic reports to the consortium of state attorneys general that negotiated the settlement. He will also be accountable to a federal judge. The settlement is being filed in the U.S. District Court for the District of Columbia.

Smith intends to remain in Raleigh, the statement says.

"I have enjoyed my tenure as commissioner of banks and have done my best to promote the strength and fairness of North Carolina's financial markets," Smith said in a statement. "I hope my efforts as monitor will contribute to the recovery of the mortgage market and the health of our economy."