Short sales end with the homeowner out of the home. This is the most common "penalty" on banks in the mortgage settlement.
While the banks are stepping up efforts to help borrowers stay in their homes, they are still spending most of the settlement on short sales and forgiveness of home-equity loans that allow them to take bad loans off their books. Profits from new lending are increasing even as regulators enforce penalties for modification missteps and foreclosures pursued with fraudulent or missing documents. Last year, mortgage revenue at the four largest lenders -- Bank of America, JPMorgan, Wells Fargo & Co. (WFC), and U.S. Bancorp --surpassed the amount they spent on consumer settlements and investor demands they buy back faulty loans.
“The banks have shown a knack for sidestepping government attempts to have them redress their role in the foreclosure crisis and keep people in their homes,” said Arthur Wilmarth, a law professor at George Washington University in the nation’s capital. “A lot of these efforts end up helping the banks, not the homeowners.”
Lets recap: The Big Banks pay a small (Small in Banker dollars, anyways) "penalty" *cough* to the DOJ for fraudulent foreclosure practices, and agree to review their own foreclosures and decide which homeowners will receive aid from the "penalty" funds paid to the DOJ that are allotted to homeowner aid. Then typically, the Banks are going to punish the homeowner with a short sale of their home that A) Results in the homeowner losing their home, and destroys their credit. B)Helps the Bank complete their obligation to the DOJ. and C)Allows the Bank further forgiveness by erasing home equity loans from their books.
The Big Banks have struck a Trifecta with Eric Holder's Department of in-Justice. For troubled homeowners, there is homelessness and despair, and just a small glimmer of hope.
