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 the 11 million homeowners who are currently underwater on their homes, according to 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, CitiBank, Wells Fargo, J.P. Morgan Chase and Ally Financial.
Borrowers who have a mortgage held by Fannie Mae or Freddie Mac -- 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."
Edward DeMarco, the director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said he won't allow the agencies to reduce borrowers' loan balances because it is unfair to taxpayers and works no better than other foreclosure prevention methods, such as lowering interest rates, extending loan terms or delaying payments.
To Cat Gouldman, who lives in the D.C. area, it's a raw deal. Like her mortgage, most loans are not retained by the original lenders. They're sold to Fannie or Freddie. Borrowers aren't given a choice when their loans are sold.
In fact, the mortgage Gouldman and her husband took out changed hands several times. First, it was sold to Wells Fargo, then to IndyMac and then it was taken over by Fannie. Her home has lost about half of its value, she said, and she's upset that she won't be able to get the same principal relief that other borrowers will receive.
"This is not the right message for the federal government to send out," she said. "Do homeowners walk into banks asking if their loan is backed by Fannie Mae? I don't think so."
"I think it's a travesty," said Derek Buckingham of Everett, Wash., who has a Freddie loan. "The government appears to still have no accountability for the problems they helped incentivize the banks to create."
Some borrowers may qualify for much larger reductions than others, as well.
Bank of America, for example, said it will slash mortgage balances by an average of $100,000 or more for roughly 200,000 homeowners. The goal, according to BofA, is to reduce the amount owed on the home to 100% match the current market value. Meanwhile, the other four major mortgage lenders, CitiBank, Wells Fargo, JPMorgan Chase and Ally Financial, are expected to reduce qualified borrowers' principal to between 115% and 125% of the value of their homes -- an amount that the Department of Housing and Urban Development said should average about $20,000.
For the homeowners who bought responsibly and made their payments faithfully, the real inequity comes in the fact that their tax dollars are paying for government-funded programs to prevent foreclosures while irresponsible borrowers accrue the benefits like the ones offered in the settlement.
"So, these people who are underwater get a break from the banks, and other hard working folks like us get screwed?" wrote Karthik Subramanian, of Aurora, Ill., in an email.
"What I think is unfair, is that people who didn't overleverage their homes, who paid their mortgages on time, who didn't borrow more than they could afford, even if the bank said they could afford more, the people who had good common sense and have done the right thing, are left with all of this business loaded on their backs," wrote Jamie Smith of Sonoita, Ariz.
That said, every homeowner could benefit from such bailouts if they help to turn around the ailing housing market, where home price declines and slow sales continue to threaten the fragile economic recovery. The settlement, however, may not help enough borrowers to do even that, said Moody's Zandi.