To help pay for the foreclosure crisis that has crippled much of the housing industry, large mortgage servicers have been asked to consider issuing delinquent borrowers up to $21,000 to vacate their homes. The payments would be a part of a broader settlement meant to correct the scandal many large servicers were involved in regarding mismanaged mortgages last year.
“Cash for Keys” Program
The five biggest U.S. mortgage servicers, including Bank of America, were told in a private meeting with the Federal Deposit Insurance Corporation (FDIC) this week that they need to consider paying homeowners who are more than 90 days behind on their mortgage loan a large sum of money to help them get back on their feet.
As a part of the program, known as ”cash for keys,” servicers would be asked to issue borrowers $1,000 to seek independent financial advice and up to $20,000 in cash as “fresh start” payment toward living costs for a new home.
In exchange for the cash, the homeowners would have to hand over their keys, vacate their properties quickly and leave them in good condition.
Just One of Many Proposals
Though the FDIC has proposed this option, inside sources say it is not official, and in fact, has been strongly rejected by some of the banks.
It is just one of several proposals issued by members of the government as they determine how mortgage servicers will be held responsible for the foreclosure crisis and freeze that resulted in a large number of homeowners being forced into foreclosure with improperly filed court documents.
Reports show the Department of Justice, state attorneys-general and other bank regulators like the Treasury Department have all come up with ways for the mortgage servicers to settle their debts. Even President Obama pushed for his own mortgage settlement with principal reductions.
Bank regulators and government officials are having a difficult time deciding how the $20 billion mega-settlement should be handled, but plan to come up with a way to help homeowners in the near future.