Servicers Asked to Consider a $21,000 "Cash for Keys" Option

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After reports that the largest mortgage servicers, some attorneys general, and even some government agencies are not comfortable with the terms in the servicer proposal, there has been renewed effort to try to come to a solution that works for all parties.

The proposal was given to servicers with the intent of revising and coming to a final draft in two months. Nearly half of that time has passed without significant strides, and many are worried that the process could be stalled at a time when a solution is considered necessary for recovery.
According to an article by The Financial Times, the five biggest mortgage servicers in the United States were encouraged to consider a “cash for keys” option for 90-day plus delinquent borrowers that would pay them as much as $21,000 to move out.

Traditionally a cash for keys option offers around $1,000 for a borrower to vacate the property within a defined time frame. The borrower is forgiven of the mortgage debt in exchange for the deed to the property, and the money can help provide for moving expenses.

According to the news source, the proposal was raised by Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair, and was not well received by the audience.

Bair is not the only official interested in different options for solving the foreclosure crisis, though. It has been widely circulated that the Office of the Comptroller of the Currency is not supportive of the 27-page servicer settlement presented to servicers in the beginning of March.

According to Reuters, the agency wants to draft an agreement of its own with the servicer, at least in part because Acting Comptroller John Walsh believes the terms of the original proposal are too harsh.