In order to avoid clogging the already sluggish home foreclosure pipeline further, some lenders have been offering cash incentives, or Cash For Keys to homeowners at risk of foreclosure in order to complete short sales and help move out of their homes.
In California, Daniel Klein, a real estate broker, said his firm had one client with a $300,000 loan who received a $20,000 incentive for a short sale and another client with a $500,000 loan who received $10,000.
According to a Chase Bank spokesman, the incentive began late last year and are available nationwide. Why would a bank pay a cash reward to someone who did not pay their mortgage? It generally wraps up the transaction much more quickly and leaves the home in better shape for resale. Beliavski, Boston commented: “if you don’t pay your mortgage, the bank should not have to offer a cash reward for you to move out and not trash your house. We are becoming a banana republic where property rights are ignored.”
Wells Fargo Bank also offers relocation incentives for short sales and “deed in lieu of foreclosure” transactions in some markets with extended foreclosure timelines. The incentive amount varies based on factors like loan balance and appraised value of the home, but can be as much as $20,000.
The programs were started after a government program known as HAFA (for Home Affordable Foreclosure Alternatives) began in early 2010. That program provides up to $3,000 in borrower relocation assistance for short sales and is available through the end of 2012.
1. Ann Carrns, "The New York Times," Business, (September 24, 2011), Bucks