Proposal Would Pay Defaulters to Leave Homes

The nation’s five largest U.S. mortgage service providers were asked by regulators in a private meeting cDaily Real Estate News  |  March 25, 2011  |   Share
Proposal Would Pay Defaulters to Leave Homes
The nation’s five largest U.S. mortgage service providers were asked by regulators in a private meeting chaired by the Federal Deposit Insurance Corp. this week to consider an industry-wide “cash-for-keys” program, in which they would pay borrowers who have stopped making their payments up to $21,000 each to leave their home, the Financial Times reports.

In the proposal, banks would offer delinquent borrowers, who are more than 90 days behind on their payments, an incentive to leave the home quickly and in good condition. If banks agreed to the “cash-for-keys” program, they would pay defaulters up to $1,000 to get independent financial advice and up to $20,000 as a “fresh start” payment toward living costs in a new home, the Financial Times reports, quoting unnamed sources.

The idea was raised by Sheila Blair, the FDIC chairman, but is not an official government proposal, the Financial Times noted. Some banks strongly rejected the idea.

Source: “U.S. Banks in ‘Cash for Keys’ Foreclosure Talks,” Financial Times (March 25, 2011) (log-in required)haired by the Federal Deposit Insurance Corp. this week to consider an industry-wide “cash-for-keys” program, in which they would pay borrowers who have stopped making their payments up to $21,000 each to leave their home, the Financial Times reports.

In the proposal, banks would offer delinquent borrowers, who are more than 90 days behind on their payments, an incentive to leave the home quickly and in good condition. If banks agreed to the “cash-for-keys” program, they would pay defaulters up to $1,000 to get independent financial advice and up to $20,000 as a “fresh start” payment toward living costs in a new home, the Financial Times reports, quoting unnamed sources.

The idea was raised by Sheila Blair, the FDIC chairman, but is not an official government proposal, the Financial Times noted. Some banks strongly rejected the idea.

Source: “U.S. Banks in ‘Cash for Keys’ Foreclosure Talks,” Financial Times (March 25, 2011) (log-in required)