Last week Federal Deposit Insurance Corporation (FDIC) Chairperson Sheila Bair proposed a “Cash for Keys” program as an option that would allow 90-day plus delinquent homeowners to be paid $21,000 to move out of their homes. With visions swirling in my head of millions of current homeowners taking such an offer and those millions of homes then being dumped on the real estate market, you could probably hear my jaw hit the ground all the way to New York. Apparently, I’m not the only one.
According to Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, "This proposal is simply outrageous and the worst bailout idea dreamed up so far.”
Apparently the proposal came up as one of many proposals being considered during a meeting between the many parties involved in the foreclosure settlement proposal by the 50 state attorneys general and federal regulators that the FDIC participated in.
Traditionally, cash for key programs involve much smaller offers, usually in the neighborhood of $1000, that are made to borrower to vacate their property within a defined time frame. The money is generally used to provide help for moving expenses.
Bair, like many officials, has been interested in different options for solving the foreclosure crisis. So far there has yet to be any meaningful negotiations between the banks and the parties who proposed the foreclosure settlement, but cracks in the ranks among some of the state attorneys general and some government regulators are starting to appear.
Last week, four state attorneys general sent a letter to Iowa Attorney General Tom Miller, who is leading the investigation, expressing their fears and reservations about the proposal. House Republicans, meanwhile, have also vocally expressed their displeasure with the proposal and the Office of the Comptroller has indicated it is not supportive of the 27 page settlement.
Acting Comptroller John Walsh reportedly wants to draft an agreement of its own because he believes the terms of the original proposal are too harsh.
The proposal was given to the mortgage servicers with the hope that any negotiations and revisions would lead to a final draft in two months. With nearly half of that time already passed and negotiations yet to take place, plus the deep divisions starting to surface between many of the parties, a quick solution is probably not in the cards.
Tags: FDIC, Sheila Bair, cash for keys, Spencer Bachus, foreclosure settlement, mortgage servicers, options, negotiations, revisions, Office of the Comptroller
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