There is a controversial program that could pay homeowners for staying in their home. The Responsible Homeowner Award Program was developed as a way to keep homeowners in their homes and paying their underwater mortgages by offering cash incentives. Created to help stop defaulting before it happens, the program pays cash bonuses from 10-30% of the mortgage balance in exchange for maintaining current mortgage payments.
Does this sound too good to be true? Well there is a catch. You cannot apply for the Responsible Homeowner Award Program. The lender has to approach you to participate. What lenders participate in the program, you may ask. The answer is, no one knows. The list of participating lenders is not public. Although the program is meant to help those who owe more on their mortgage that their home is worth, these Americans will have to wait and see if they are among the homeowners chosen to receive the award.
Much of the controversy lies with why we are developing programs to reward individuals for meeting their financial obligations. There are those who think that incentivizing people to pay their mortgage enabled irresponsible financial behavior. After all, if someone could afford to make their mortgage payments on time in order to receive a bonus, then they could have made them without a bonus. Shouldn’t homeowners make their mortgage payments on time because they agreed to on the original mortgage agreement and not because they are being paid to do so?
With almost 25% of homeowners underwater in their mortgages, a great deal of the country is struggling. Right now, the available help seems geared toward those who are defaulting on their mortgage. If you are not making your payments on time, then modification programs can help you to stay in your home. Those homeowners who continue to make their payments regardless of the loan to value ratio have not had any programs to help them through this dip in the market. The Responsible Homeowner Award Program has been geared to change that.
So the question remains, should people be rewarded for meeting their contractual obligations? As long as there are programs to bail out those who do not make their payments on time, maybe there should be. Homeowners who are deep underwater in their current mortgage are making the conscious choice, a strategic business decision, to walk away from these homes. Is providing an incentive for them to stay in these properties be the answer to the ever-increasing number of foreclosures? Or is it simply reinforcing irresponsible financial behavior?
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About David Goldstein — David Goldstein is an Owner and Founding Partner of Express Schools, LLC. which operates online education providers Real Estate Express, Insurance License Express and License Tutor. Follow him on Twitter.