Pay Homeowners Not to Walk Away From Their Mortgages
Some homeowners are so far underwater on their mortgages that they’re tempted to strategically default, that is, walk away even if they can afford the monthly payments on their current mortgage.
New Jersey-based Loan Value Group LLC has come up with an incentive to keep borrowers making their mortgage payments. In other words, pay them to keep paying their mortgage.
The company says it is launching the Responsible Home Owner Reward program where it will pay a cash reward to borrowers if they agree to keep paying their mortgage.
The program is being launched with one of the largest investors in consumer and mortgage debt in the U.S. The mortgage investor, possibly joining with other risk holders, such as mortgage insurers or second-mortgage holders, offers a cash reward to borrowers if they agree to keep paying their mortgage.
Loan Value Group will work with owners of risk to target, contact and ultimately enroll borrowers who are at the greatest risk of strategic default. The firm’s proprietary model evaluates each individual borrower’s propensity to strategically default to arrive at the optimal Reward size.
The incentive amount varies by borrower depending on income, negative equity, geography and other risk factors. The desired outcome for all parties is to create an incentive for the borrower that positively influences behavior, at a cost to the risk owner that is far cheaper than every other option, including delinquency, sale of the note, or default.
“RH Reward is the only program of its kind in the mortgage industry, and its structure and incentive-based design are unique. There is no cost to the borrower whatsoever, yet the homeowner receives the full benefit of the Reward,” said Loan Value Group CEO Howard Hubler.
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