Saturday, October 23, 2010

"Cash For Keys" Gone Wild..Fannie Mae's "Dirty Little Secret"

I had a rather disturbing conversation with a real estate agent who works primarily with Fannie Mae in my area.  The "cash for keys" program has been around in real estate for a long time but I didn't know a lot about it until last night.

We began talking about housing slowdown she started compaining about the rampant abuse of  Fannie Mae's "cash for keys" program.  Needless to say I was totally shocked(and sickened) at what I heard.

Before I continue, keep in mind that I have no hard details about the abuses of this program, and this may not be completely accurate because I only have the one source above.  I saw no documentation to confirm what I heard.

So let's continue.  So I started to ask lots of questions about the details of the program.  The Realtor got angry as she started giving me the details because she feels the taxpayer is being completely raped by the process. 

Using this program during normal times when the foreclosure rate is 1% on prime loans is one thing.  It's a whole different story today as our deficit deepens and foreclosure rates soar.

So here's how it works.  Deadbeat homeowners who aren't paying their mortgage are basically being bribed with hard cash from Fannie Mae to leave their house.

The money is for "moving expenses" and the number of dollars various depending on what the deadbeat says it will cost them to move.  She has seen the numbers range from $1000 up to $3700(which is the highest she saw).

The incentive for Fannie of course is once the deadbeat leaves they can then get the foreclosure process started so they can recoup what they can on the house, take the hit, and then move on.

At this point I wanted a little more detail.  So I asked:  "What about the banks that have done Fannie loans?  Are they being forced to take the loss via foreclosure?" The Realtor explained that the bank has the right to turn down "cash for keys" program. 

However, if they accept it, a price is set at a much lower value(based on what they believe it will list for as a foreclosure) and Fannie then buys the loan from the bank for the price they determined.  This is all done before the "cash for keys" is offered since Fannie is the one making the deal.

What angered her(and me) was how easy these deals are being approved at our expense(since we the taxpaers backstop Fannie).  She explained then explained how the "cash for keys" is executed.

The Realtor approaches the deadbeat buyer and asks them what it will cost them to "walk away" and move from the house(she added that many of these borrowers have not made a mortgage payment in 2 years).  The deadbeat then throws out a number like $3000.  The agency then goes to Fannie and gives them the number.

Without hesitation Fannie accepts the offer and the check is cut.  This Realtor told me she has NEVER seen ONE instance where Fannie has not accepted the offer from the deadbeat.  There is a limit to what can be offerd for moving expenses but whe couldn't recall it because she has never seen an offer turned down.

This whole thing made me SICK of course once I learned how the who thing works.  Why is the government cutting checks to people who have been living in a house for free for a year or two?  How do they have the right to throw around our taxpayer dollars like this? 

What's even more disgusting about this program is once word gets out among the neiborhoods that Fannie is cutting $3000 checks to get you to leave the home, half of the neighborhood follows(especially in the lower income areas according to this agent) as their homes fall further and further underwater.

She is now starting to worry that many homeowners in certain areas are going to just take the check and walk away. 

Folks, we have to start asking ourselves if this program should be continued at a time when borrowers are already tempted to say "screw it" and bail on their loans.

I asked her if all the banks are involved with this.  She said that they deal mainly with JP Morgan and Bank of America.  However, she did emphasized that this is a Fannie Mae program and the only way the bank participates is by dumping the loan to Fannie who then offers the "cash for keys" program.

The Bottom Line

So I guess we now have a "stealth" bailout for deadbeat homeowners.   The Realtor above told me that the industry calls this "Fannie's dirty little secret".

I'll tell ya, I get more and more disgusted the more I learn about the housing fraud.  The whole damn thing stinks to high heaven. 


This Realtor also added that the foreclosure moratorium has brought housing to a standstill in the area.

Today's newspaper headline confirmed her thoughts:

"Sales of existing homes in the Rochester region tumbled during the third quarter after the expiration of federal tax credits that drew thousands of buyers into the market.

"Data released Friday by the Greater Rochester Association of Realtors showed that resales in the 11-county region served by the organization fell 27 percent from July through September compared with the same period of 2009.

"Right now, what Rochester real estate is experiencing is post-tax credit shock," said Armand D'Alfonso, president and CEO of Nothnagle Realtors, the region's largest realty firm.

Data released Friday by the Greater Rochester Association of Realtors showed that resales in the 11-county region served by the organization fell 27 percent from July through September compared with the same period of 2009.

There were 2,664 closings during the third quarter, 964 fewer than a year earlier. Despite the slack demand, selling prices edged up by 1

"Right now, what Rochester real estate is experiencing is post-tax credit shock," said Armand D'Alfonso, president and CEO of Nothnagle Realtors, the region's largest realty firm.

"The phone totally stopped ringing after April 30," said Nunzio Salafia, an agent and co-owner of ReMax Plus in Brighton. "A lot of people did not buy because they were clinging to the hope that the government would do something," such as extend the credits, as happened once before."

Stay tuned.  The housing crash gets uglier by the second and prices are headed in only one direction:


Herb said...

Cash for keys has been around a long time. As long as it saves us money in the long run, I am ok with it.

Giving those people a loan backed by taxpayers to buy the house in the first place is what angers me.

James B said...

It all sounds true except the part about the realtor caring about anybody else. :-)

Anonymous said...

I was renting a home and paying my monthly rental payments. The owner, however, did not pay the mortgage so the house we were renting was foreclosed on. The Cash for Keys allowed me to find another home. This barely covered my damage deposit fee in a new place, the cost of hiring movers, etc. I think it is a good idea. The inconvenience of moving is a greater cost than the funds they offer. Whoever siad "deadbeat" - they need to live in the real word of higher cost and not more pay. I would say the phrase
deadbeat is highly judgemental and my guess is that person is not one that works 50 hours a week to barely afford food and clothes for the family.

Anonymous said...

Using the term "Deadbeat" to describe everyone who falls into a situation where they are facing eviction is retarded. No doubt there are are many that could be classed as such, but far more that most certainly don't, myself included. In my case I've recently been offered CFK assistance and I thank God that I have! My whole experience from buying my property to date has been one of complete despair and bewilderment. The bank(s) I was dealing with have left me with a bad taste in my mouth for numerous reasons and I personally believe I am one of those people who perhaps should NOT have been given a loan in the first place. At least not such a large one. Yes the taxpayer feels the punch but not the full force as the actual homeowners who are losing their homes and having to deal with the problem in real time. Without CFK I'm certain many of these people would indeed have little other choice than to become "Deadbeats."

I think people really do forget that the Banks themselves are thew ones who caused the whole mess in the first place, and in numerous cases have taken "your tax payer dollars" by the truck load as a result. To hell with the Banks, "You reap what you sow.."

Anonymous said...

They pay people to trash these places out and do intial cleaning. Why not pay the "deadbeat" so they do not steal the toilets, cabinets whatever else they can get their hands on. These houses are left Broom swept with little to no damage. This saves everyone money........

Anonymous said...

I am no dead beat. I was strung from one end of "Bank of America (really?" to the other. What ultimately happened is they got all my information wrong several times, lost it and basically strung me out long enough for me to loose the house. I wanted my house,but apparently they wanted it more. I have been here 9 years, why would I just walk away? Our income rebounded and just needed a little assistance that we give immigrants...or those not so fortunate, but no sir, they ran me in the ground faster than a stake thru a vampires heart. Now I am renting at the same amount as my mortgage was. So, don't call me a dead beat you dumb ass. I was offered $475 bucks to move. Yes, I took it. Where in the hell is this $1k to 3k crap coming from.

Anonymous said...

I really resent the fact that everyone that lost their home and receives cash for keys is labeled a deadbeat. We tried to hold on to our home hoping that things turn around and property values would stabilize. After my wife lost her job and after we burned thru all our savings we asked for help from our lender. Our property value had dropped by 50% and we were underwater. But these lenders won't even discuss helping unless you have fallen behind in your mortgage payments by at least 3 months. We were informed of this when calling our servicer, BofA. So, we stopped making our payments and applied for help. It took BofA almost a year to do the paperwork and reject us in the end. When we bought our home 6 years ago we put $40 000 cash down and had a $50 000 savings account. We put over $25 000 of improvements into our home using hard earned savings. Now our savings are gone and our house is gone as well, sold at auction.
And yes, we will be taking all of our improvements to the house as well as appliances and maybe even our kitchen cabinets and granite and whatever else we can sell to recoup the thousands of dollars we lost to what I call the biggest bank fraud in history. And yes, we retained a lawyer that is helping us to stay in our home as long as possible, rent free. We were defrauded by greedy wall street that gave bad liar loans to anyone and because of that home prices as well as the economy are in a free fall. We are the last original owners left in our neighborhood, everyone else lost their homes and moved long ago. The house across the street has been foreclosed on a second time already. What about my tax dollars? My tax dollars paid to bail out these banks, where is my bail out?
So don't talk about us as dead beats. Be thankful that you were not caught in this disaster, instead, focus on the real problem, greedy wall street that didn't care what happens to hard working American Taxpayers when this bubble burst and wrecked our economy and ruined home values.
Are we taking cash for keys from Fannie Mae, no, that would in effect mean we are paying ourselves, with our tax money. Instead, we will just stay in our home for as long as possible and save up for the day we finally have to move.

Anonymous said...

amen anonymous
I am going through the same thing.
Deadbeat? really? dude are you kidding? Deadbeats don't usually buy houses, they are too deadbeat to even come up with down payments or sign mortgages in the first place. Most people who buy homes have a desire to be a home owner "the American dream"
I applied for help via the Home loan modification program 6 months before I was in real trouble , never had missed a payment or been late in 6 years and we owned a home prior to this one(husband and I lost our business of 10 years in the economic downfall of 2008/2009 and then applied for home mod 3 times in two years...they won't even consider working with you or lowering your payment for any reason until you are defaulting on the loan. yes "missing payments"
You are basically forced to not pay to get help supposedly, so we missed but then we were rejected anyway and eventually foreclosed upon. They would be getting a payment if they had been somewhat willing to work with us. We needed time to put our business and income back on track,
what a mess. We would still have a home, it would'nt be sitting there empty while they try to sell it for profit. It's barley underwater, they could have worked with us. We pu 25000 down on that house. The only person I know who was able to save their home via home mod was a married couple who were real estate agents themselves. Chase stepped in at the last minute after many letters from attorneys sent and all the right lingo was said and said okay we'll lower your payment from 1500 a month to 900! unbelievable.

Anonymous said...

It’s all such a joke. What you hear and what is done is certainly not really what’s happening. The bank got their money. What does everyone think happened to the $750 billion dollar bail out? The banks have not lost a dime. I truly believe they have made more money than before. As human natures goes they need to blame someone so let’s put it back on the hard working family who are just getting by. There’s no strength there no battle to be fought with them the Government is there (issue) that who they need to offer the explanations to o. They (Banks) have even found a way around that. They are now filing all deficiency judgment against the foreclosed homeowner. That took a lot of man power to figure out they could not make it look bad even enough for the so called dead beat homeowners who are were struggling let give it to them again. It just does not stop with handing over the keys or thinking you are done with the whole ordeal .When the bank finally does get the property back from you they just keep coming at ya.

Anonymous said...

The fact that you use the term "deadbeat" to refer to people, makes me question your intelligence. Therefore, I find no validity in your point of view. Unfortunately, there are very very good people that find themselves in very terrible situations right now. I certainly hope that if you ever find yourself in a bad situation, you will find people more compassionate than you are. Very sad.

Anonymous said...

You are an ass if you think the term deadbeat should be used in this economy.
You must be far to the left man.
I have friends that lost their jobs making 6 figures down to 0.
Did you grow up with a silver spoon. I didn't and have worked full time since age 15 and last year made $107,000 and now I make $28,000 because my company moved to the UK.
Get real with your comments son.

Brown said...

All I can say is I sure hope the ignorant author of this original post reads all the comments because I agree with them and have personally experienced what they have. We too tried to do a loan modification with BOA to make our mortgage payment more affordable to us since my husband lost a very good job with a well known national and international delivery corporation due to the struggling economy. We in fact were told (lied to) by BOA that we were approved for the modification and in the final phase of it when much to our horror found out our house went to sheriff sale. We were not even notified of the sheriff sale. We of course lost our home by no choice of ours. We didn't try to walk away from our home or live for free. So think again, ignorant ass before you go blaming hard working people of being "deadbeats"! We both have jobs, work very hard to raise our kids, two of which have special needs. And NO, we don't expect any help with them, either! Get a life!

lisadaylene said...

Anyone that lumps everyone living in a foreclosed home a deadbeat is a moron. My father died, we have taken care of his home while living in it, the bank is getting a beautifully taken care of home, with a nice "blue" pool, and I am happy to accept the cash for keys. I am not, nor have I ever been a deadbeat, and what a stupid person to say that. Every case is different.

Anonymous said...

Fucking deadbeat author

Anonymous said...

I just found out about this program, because my neightbor moved out once cash for keys was offered to her. She move into her parents house once they passsed away and she way evicted from her appartment for being arrested and put on parole for doing meth. She lived there for just over a year and never paid one morgage payment. Three months after she moved in with her three childern (all by a different man and all evnolved in drugs) she stopped paying for trash service and started piling it up in the year. (She left the utilities in her parents name, so all outstanding balance will go unpaid). Nothing could be done because she never owned the house. The city code enforcer tried to contact the bank who held the morgage, but by that time the house had been forclosed on and Fannie Mae had bought it. He had to start all over again and now the garbage had been piling up for 8 months. Then 7 weeks before she moved out her water was shut off, her dog died in the back yard, and the smell coming from the house and yard (dog poop from two dogs was never cleaned up) was sickening. I know what your thinking why didn't I call Social Services and have them check on her 3 and 10 year old child. Well Social Service had been making regular visits, because she was on probation for doing meth.
I am hoping you are getting a clear picure of what our quiet neighborhood with clean yards was suffering through. We finally think she is getting what she deserve, evicted. But NO, the real estated agent came around to offer her thousands of dollars to move out. Why are we as an society paying people like this to do what they should already have been force to do? Keep in mind we are already paying for Social Services to watch over her children, parole officers to make sure she stays clean, class for her and her children trough Social Services. Yes I know she has to pay some fees, but I heard her bragging on her iphone abouthow she did not have to pay very much. Did the bank cause this forclosure? Is this woman a hard working decent human being, who is doing the best she could and deserving of being paid to move???

Anonymous said...

This Author is an asshole who doesn't know SHIT about the process that the bailed out banks put the consumer through and make the tax payers pay for!!! Go to hell if your going to call people "Deadbeats" when you clearly don't know the first thing about how messed up this banking/mortgage system!! Cash for Keys is hardly a "dirty little secrets" Fannie Mae and Freddie Mac and all the banks are screwing the tax payers and home owners in so many worse ways!! Read the internet you idiot!!

Anonymous said...

whole article - off. it is cash for keys not cash for deed first of all. The offer is not made until the foreclosure is complete. Fannie Mae can put money in the hands of the occupant (former homeowner or tenant) in exchange for getting the property back without vandalism in under 45 days - or they can put the money in the hands of an eviction attorney and risk damage to the property by those being evicted. I think cash for keys is clearly economically responsible.

Anonymous said...

Yes, the banks made bad loans but please don't assign them the blame. Have you ever heard of a "BUDGET"? Everyone is responsible to know how much they can afford. It's simple math. Income verses expense.

I am also disgusted with Obama's "CHANGE". It's more like "HIGHER TAXES & BAILOUTS ALL AROUND". We're all paying this mess. Common sense apparently isn't so common.

Anonymous said...

Well you are lucky fannie mae did a forclose on my house and gave me 2 hours to get what I could. I am a Vietnam veteran and I am very sick yesterday someone called me and told me fannie mae went to my house cleaned it out they took the much needed meds n my med machine tht I need. They were suppose to let me know when I could go back in my house to get my meds instead they took the meds I very much need.

Anonymous said...

"deadbeat?" everyone has situations that they find themselves in sometimes. God forbid you find yourself in this situation. cash for keys has been around for a long time and it is a good idea for the loan company because, for one, it gets the "deadbeat" out sooner and with minimal damage to the house, thus saving them money on re-doing the house. second, the loan company saves tens of thousands of dollars in legal costs to evict someone from the house.

Anonymous said...

I am sorry but you have no right to judge people without the facts. I spent two years working with my bank to do the "Making Home Affordable program", I had never heard about the program until I called my bank to tell them I might be late on my mortgage because I had lost my job and was applying for unemployment and looking for another job. The bank told me about this great program that would lower my interest rate and payments. I was recently divorced and trying to make it on my own. I thought it sounded great.
For two years I did everything the bank told me to do. I sent in the same paperwork over and over again. At first the bank had me making half the mortgage payment but than they told me to stop. I requested to continue but the bank would not let me. So after two years waiting for the bank to do something they finally looked at my loan and I was told I qualified for the program but I was TOO far behind on my payments for them to help me. And they were selling my house in two days on the court house steps. Real nice of them. I had to do bankruptcy and when my house was finely sold was told about the "Cash for Keys" program. I was told I could get up to $2,000 if I cleaned my home out. I was not just handed the money, I spent a lot of money cleaning, taking things to the dump and making sure the house looked nice for the new owners.
I just received notice from the IRS that I have to pay taxes on that money. Just keeps getting better. So don't tell me how people are getting money for nothing until you have walked in my shoes.

Anonymous said...

Im not no Deadbeat Bitch! i fell on hard times
i want 4,000 or im gonna trash this house beyond repair

Anonymous said...

You only get the check if you leave the house clean with all the appliances etc. Noone anywhere in this article has any clue how r his works

Payton said...

I lost my husband, my family, my home. I was pleading with Ocwen to refinance my home and extend my payments 25 more years so I could raise my children and keep some sort of stability. Ocwen sold My loan 4 times during the process and I had to start over every single time. Aggressive behavior - no hope, corporation. I was defeated, unless I wanted to sit on my porch in my rocking chair with a riffle hoping for national attention. (Actually I wish I would have done that). Threat after threat, hopeless letter after hopeless letter. We were paid to leave. All I was asking for was 200 less a month. They kept ballooning my payments. I could not bare the stress. Also, I am being taxes 1/3 of what I received. I work hard, I am a strong woman and I feel sorry for your ignorance.

Ace Lynch said...

The ignorance in your post is just as disgusting as your use of the term 'deadbeat homeowner'.

Anonymous said...

Very sad indeed. I am a survivor of domestic violence who was offered $3000 CFC which my abusive ex pocketed after I was bullied out of my home. He allowed it to go into foreclosure to "punish" me for his DV record and jail time, lying to me every step of the way. When I received the Quit and Vacate notice with CFC offer, he assured me he would do his part in removing his mountain of stuff from the property. Namely junked vehicles and his shed full of trash to comply with "broom clean." Needless to say, that didn't happen but I worked dusk till dawn more than broom-cleaning the home and acreage. I could not afford an attorney, legal aid turned me down and the DV divorce judge pretty much mocked me, allowing my ex to walk away clean and leave me destitute. He also trashed my credit. I was a stay at home mom for the most part yet did contribute financially to the best of my ability - I am also disabled. Three years after the fact, I remain homeless. No car, abusive non-supportive family, "displaced homemaker" and other govt./non profit organizations to assist with job training and housing are elusive if not non-existent. I cannot escape his abuse and control, believe me, I have tried. Good people find themselves in terrible situations. I agree. As do the innocent who do not know they've been deceived until it's to late. That $3000 CFC would have changed my whole world.

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Jack Abramoff said...

Hi Jeff!

I hope, for your sake, that you've managed to adjust your perspective in the six years that have passed since you wrote this rubbish.

Take a minute to think about it, Jeff. You can't honestly believe that all, or even the majority of, people who were foreclosed on and/or offered CFK to vacate their homes are deadbeats. If you need an explanation for that, then there's no point in offering one; you wouldn't be capable of wrapping your head around it.

Hopefully this was just a shortsighted misunderstanding on your part. I'm willing to give you the benefit of the doubt before jumping to conclusions ...

... like you did by assuming that:

1.) all/majority of foreclosed homeowners are "deadbeats," and

2.) CFK does NOT mitigate financial loss to the taxpayer

BTW, most real estate agents I've dealt with in this field actually LOVE the CFK program, as they normally have a vested interest in getting the house on the market ASAP.

Now, don't get me wrong. I understand you were angry about something when you wrote this blog post, so maybe you didn't have the time to do some critical thinking before posting it.

We all know what happens though when moved to action by untempered emotions. Never a good thing. Good luck in not making the same mistakes again in the future.

Salutations, Jeff ;-)