As homeowners continue to see unemployment, financial distress, and other issues in their personal lives make meeting obligations like a mortgage payment more difficult, there are more financial institutions looking into opportunities that will help not only prevent foreclosure but may help homeowners when it comes to transitioning from their home through opportunities like the cash for keys incentives that some servicers offer or continued short sale efforts that may be beneficial for both a bank and a homeowner. Yet, we have seen some financial institutions opt more for one program or another as opportunity for homeowners to surrender their deed and potentially be offered financial compensation to vacate their property can in some ways be more beneficial for a bank in terms of reselling their home, the value they may be able to get out of the property, and helping homeowners who are simply in a bad financial position.
However, this does not necessarily mean that all homeowners have benefited from programs such as this, as the federal Home Affordable Foreclosure Alternative program has offered short sale and deed in lieu of foreclosure opportunities as well, but again this is not something that homeowners have always been able to use when financial problems, negative equity, or other personal issues have arisen. As an example, when short sales are involved it can be a very drawn-out process and there are also factors such as mortgage servicers and investors agreeing to allow a homeowner to sell at a loss.
Yet, there are also some indications that banks may be opting more for a cash for keys plans which could help a homeowner by giving them the financial assistance they need to transition from their home and, there are arguments being made that this could cut down on the loss that a bank sees when selling a property, as foreclosures are often sold at highly discounted prices than may have originally been seen if traditional selling conditions were in place.
Arguments against some of these alternatives to foreclosure usually surround the fact that homeowners may stand to take a hit to their credit score, but there are those who counter this idea with the fact that homeowners who continue to try to stay afloat in a mortgage that they simply cannot afford can do more damage to their credit by missing payments on a variety of debt obligations, which is a problem that has arisen in some instances, but there are also benefits that homeowners find from these cash for keys plans or even incentives offered through some short sell programs, as they can help homeowners with moving costs, security deposits on a new apartment or home they are renting, and may help them in meeting other expenses as well, as there are some homeowners who are seeing a sizable amount offered for their corroboration when the property may need to be vacated as a result of a homeowner’s inability to pay.
As always though, many officials prompt homeowners to make sure they explore not only foreclosure prevention options from their mortgage servicer but their state as well, as these cash for keys incentives or short sell opportunities may have been beneficial for some, but this does not necessarily mean that all homeowners who are suffering from financial distress will have to resign themselves to these alternatives programs as a result of their payment problems.