I have heard and read a lot about the Cash for Keys programs that banks offer renters or 
current occupants after the home has been foreclosed on. Cash for Keys is basically a monetary incentive that the bank will offer to the resident to move out by a certain date, thereby gaining possession of the property quicker and cutting losses.
To read a great article loaded with details on this, go to John Occhi's post, "I Don't Get It! The Bank Forecloses on Their home and Then Pays Them To Move...Or Why Cash for Keys.
So what is Cash for Keys...with a twist? Well, today I had lunch with a friend and was literally blown away. Now some of you may read this and think, "Gosh, that's not so surprising." But I was speechless and for those of you who know me, that is an anomaly in and of itself.
I knew my friend was not doing well. He was plagued with over $100,000 in medical bills and the finances were going downhill fast. He did not want to face foreclosure, so he called his mortgage companies (he had a 1st and 2nd mortgage) to see if something could be worked out.
He called the 2nd mortgage company and asked if they would be willing to remove the lien from his house. They were willing to do so for $5,000. He did not have that kind of cash, so he then called the 1st mortgage company and asked if they would help. Long story short, the 1st mortgage company paid the 2nd mortgage company the $5,000 to release the lien. Then the 1st mortgage company turned around and paid my friend a good amount of money to "turn in his keys".
No foreclosure process EVER took place.
What blew me away the most? On his credit report, the mortgage companies reported:
Mind boggling, but I am very happy for my friend!
I have never heard of any of this before. So I am just as amazed as your are. One of my questions is... Does "Paid as Agreed" affect your credit, instead of having "paid in full"?
Thank you for commenting Brooke! Paid as agreed is just that...the creditor is saying that the loan was paid as agreed, which does not have a negative affect on the credit. Although the comment section of his credit report doesn't say "paid in full", his balance is zero, so it's all good! :)
I would love to see more mortgage companies do things like this for home owners that are in trouble because of situations like your friends. I hate to see bath things happen on top of something that has already gone bad in their life.
But, if the housing market just does a downturn in an area and people want to move, then I'm not sure I would go for something like this, stick it out and in 15 years a small downturn won't mean much and you will still have a roof over your head.
I'm right with you, Todd! Thank you for the comment!
Cash for keys happens a lot out here, but I have never heard of a story like yours! Thanks for sharing. Crazy times right now, aren't they?
Crazy times is right, Terrie! There are moments when I think...What will we all be saying 5, 10 or 15 years from now? Will we be saying, "Wow! Those were some tough housing market days...so glad we got out of that!" ??? In the meantime, we just watch, learn and try to absorb all this craziness in! Thank you for reading and commenting!
Very cretive plan of action. My compliments!
I agree, Trey!
I've never heard of something like that... Just when I was thinking the banks were obstinate and cold-hearted. This shows that it pays to ask.
I agree, JoEllen! Just like myself, I had no idea. I knew that banks and mortgage companies are being more and more open to loan modifications, but this one really threw me. You're right...if we just ask, perhaps it can not only save people from losing their homes, but also be able to walk away without foreclosure, if there are no other options left.
now I wonder... does one have to be behind on their morgage in order to quialify for "cash for keys?" I am recently divorced and am getting close to having some trouble paying my mortgage.