Cash For Keys: Banks Paying Delinquent Borrowers So They Don’t Trash The House

by Alex Stenback on March 28, 2008

Article and video from the WSJ, Buyers Revenge: Trash the House After Foreclosure.

These days, bankers and mortgage companies often find that by the time they get the keys back, embittered homeowners have stripped out appliances, punched holes in walls, dumped paint on carpets and, as a parting gift, locked their pets inside to wreak further havoc.

This can obviously cost thousands of dollars to fix before re-sale. The solution? Payola. 

The most practical way to ensure the houses are returned in decent shape, lenders and their agents say, is to pay homeowners hundreds or even thousands of dollars to put their anger in escrow and leave quietly.

The moral: Never underestimate the goodwill engendered by a fat stack of cash.

{ 5 comments… read them below or add one }

Nate March 28, 2008 at 11:08 am

hmmm…

So banks loan money to people who show no ability to repay so that they can buy a house. House depreciates, people default, and the banks now offer more cash to these people so they don’t damage the collateral?

I hate to say it, but the banking industry is increasing my respect for loan sharks, at least they now how to run a business.

MT March 29, 2008 at 7:19 am

How about what is says about society? I know that the actions described in the article aren’t representative of all homeowners, but I for one was embarassed by the people described in the article. They bought something they can’t afford, they lose that asset, and their next action is to attempt to ruin it for the new owner? I wish the article at least made mention of how disturbing that behavior is.

Gideon7 April 9, 2008 at 1:00 pm

In MN the bank can’t evict the tennants until 6 months after the foreclosure sale. This is called the ‘redemption period’, which by MN law allows the original buyer a chance to buy back the property.

The buyback almost never happens (since no bank will give a loan to someone who just defaulted) so it basically just gives a free 6 mo period to squat and trash the place.

dave May 2, 2008 at 6:16 pm

Fraud alert! Fraud alert! Fraud alert! Fraud alert! Fraud alert! Fraud alert!

More money lost in fraudulent cash for key programs. Some agents offer friends or strangers to participate in the cash for keys program even if there is no occupant in the residence. In return the resident splits the payment with friend or stranger.

Example: An empty foreclosed home an agent offers a friend or stranger cash for keys even though the friend or stranger does not reside and never has resided at that residence. The previous owners of the foreclosed home never rented to the said cash for keys recipient.

dave May 2, 2008 at 6:17 pm

Fraud alert! Fraud alert! Fraud alert! Fraud alert! Fraud alert! Fraud alert!

More money lost in fraudulent cash for key programs. Some agents offer friends or strangers to participate in the cash for keys program even if there is no occupant in the residence. In return the resident splits the payment with friend or stranger.

Example: An empty foreclosed home an agent offers a friend or stranger cash for keys even though the friend or stranger does not reside and never has resided at that residence. The previous owners of the foreclosed home never rented to the said cash for keys recipient.

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