Cash for keys programs are offered by mortgage companies to allow homeowners a chance to avoid foreclosure. If your lender has a cash in exchange for keys program, you need to complete a deed in lieu of foreclosure. Keep in mind that completing a deed in lieu of foreclosure does not guarantee you cash. There is also a federal program that provides relocation help when you exit gracefully.
How It Works
Depending on your state, foreclosure can take months or even years. Another problem banks face is vandalism. Some homeowners choose to damage the home or steal fixtures. To avoid a lengthy foreclosure process, some banks established programs that offer cash to homeowners in exchange for the keys to the home. A homeowner must agree to leave the home in good, clean condition. Each mortgage company is free to offer or not offer the program on a state by state basis. You need to inquire about the cash for keys program by contacting your lender. Requirements for the program vary depending on the company. Some states, including California, run a cash incentive program to help with the cost of transitioning into another home.
Home Affordable Foreclosure Alternatives
In 2009, President Barack Obama developed the Making Home Affordable Program, which is designed to offer solutions to homeowners who suffer a financial hardship. Under the program, the Home Affordable Foreclosure Alternatives (HAFA) program awards cash to homeowners who relinquish ownership rights to the home. To qualify for the program, you must be eligible for a modification through the Home Affordable Modification Program but unable to afford the payments. Your current mortgage must exceed 31 percent of your gross monthly income. Lender participation in the program is voluntary.
Amount of Assistance
The amount of assistance you can receive varies among bank cash for keys programs. Assistance is often negotiable, depending on your situation. Lenders may provide reasonable funds to cover the security and utility deposits, first and last month's rent, movers and a rental truck. The California Transition Assistance Program gives eligible households up to $5,000. The HAFA program provides up to $3,000.
Deed in Lieu of Foreclosure
Only your lender can determine eligibility for a cash for keys program, whether the program is bank-sponsored or federal. In most cases, a deed in lieu of foreclosure is only offered after you attempt to sell the home. According to the U.S. Department of Housing and Urban Development (HUD), the home must be on the market for at least 90 days before the lender will agree to a deed in lieu of foreclosure. Completing a deed in lieu of foreclosure is a simple process that allows you to sign the deed back the bank. In addition to receiving cash, you avoid the negative impact a foreclosure has on your credit rating, and you eliminate the possibility of a deficiency judgment.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.