For example, the banks can wipe out more than $2 billion of their obligation by donating or demolishing abandoned houses. Almost $1 billion can be used to help families that have already defaulted move out.
“The $17 billion is supposed to be the teeth of this settlement,” said Neil M. Barofsky, the former inspector general for the Treasury’s bank bailout fund known as the Troubled Asset Relief Program. “And yet they are getting all this credit for practices that they do every day.”
Only 60 percent of the $17 billion designated for borrowers, or $10.2 billion, must be used to reduce principal for borrowers who owe more on their mortgages than their homes are worth — though banks can do more if they choose.