“NEW YORK (CNNMoney) — As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states’ attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.
Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.
However, that’s only a fraction of the11 million homeowners who are currently underwater on their homes, according CoreLogic. And it’s also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years.
“The impact [of this settlement] will be small,” said Mark Zandi, chief economist for Moody’s Analytics. “It’s not a home run; it’s a single.”
Principal reductions will also only apply to certain borrowers who have mortgages still held by the five major lenders: Bank of America (BAC,Fortune 500), CitiBank (C,Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500) and Ally Financial.
Borrowers who have a mortgage held by Fannie Mae (FNMA,Fortune 500) or Freddie Mac (FRE) — roughly half the market — are out of luck. Loans insured by the Federal Housing Administration are also ineligible.
“If it’s offered to one group, it should be offered for all,” said Stacy Ovendale from Seattle, who says her home has lost nearly 50% of its value. “When my mortgage was written up, I had to take whatever program was available to me at the time, which happened to be FHA. … It’s so frustrating because my loan is with Bank of America but since it’s FHA, my mortgage is current and I have chosen to be responsible, there is nothing they can offer me in the way of principal reduction.”
