The Federal Housing Administration (FHA) announced yesterday they are adopting a new Cash for Keys program whereby lenders will pay borrowers with FHA-backed loans $2,000 for agreeing to turn their property over to the lender by using a deed-in-lieu of foreclosure. By applying for and getting an approved deed-in-lieu under this program, borrowers will be released from their obligation to repay the mortgage and may also have their deficiency judgment waived too.
To qualify for the program, borrowers must be facing long-term financial hardship, had their house on the market at a fair price for at least 90 days, and not have any other additional claims or liens (other than the first FHA mortgage) outstanding against the house. In addition, the borrower must vacate the property and leave it in broom clean condition.
Since the possibility may still exist for owing the lender a deficiency judgment, and the potential for having tax consequences under a deed-in-lieu, borrowers applying for this program should seek the advice of tax consultant or a real estate attorney to make sure they understand the process and know their rights and responsibilities.
And so, once again, the foreclosure beat goes on.
Metro Mortgage Company is a federally regulated Mortgage Banker specializing in residential Florida mortgages including Conventional, Jumbo and FHA/VA loans. Visit our home loan approval process page for more information or call us today at 888-617-3674.
Tags: FHA, foreclosures, HUD, mortgages
7 users commented in " FHA to Pay $2,000 for Cash for Keys Program "
Follow-up RSS Comments Feed or Leave a TrackbackYou know, I have to tell you, I really enjoy this blog and the insight it provides. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted about it.
I agree with Susan, but the best part about this blog, is the picture of the Bass on the left hand side. He’s a cutie pie!
On topic, this could be good for people, but I don’t know that $2,000 is enough… Great information. 
Well, thank you both for the very nice compliments.
Someday I’ll post the story about the SOB fish!
I’m not sure why they are pushing the deed in lieu. As you stated, the tax implications may not make it worth it aside from trying to get people NOT to trash their homes before losing them.
At first blush, that’s what I was thinking too. Then I remembered how in a short sale (according to the big three credit bureaus), you take approximately a 2 year hit to your credit score before you can start the recovery process. So, I asked our resident expert Terry about it. She has been a FHA underwriter for almost 20 years.
Basically, a deed in lieu will also be a less of hit to your credit score than a full blown foreclosure finding. Yes, it will be a really bad mark for a period of time, but you can recover from it a lot quicker than you can from having a foreclosure on your record.
Bjamin,
A deed in lieu is much worse then a short sale. Deed in lieu = 7 year hit. A short sale up to a 2 year hit depending on how the release of debt was written. BIG DIFFERANCE!
Yes, but it is still better than the 10 year hit the credit agenices are now handing out for a full blown foreclosure.
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