In the massive foreclosure market where banks are stalling in order to not get stuck with more falling assets and homeowners are deep underwater on mortgages, there's a growing free market solution: Cash For Keys businesses.
Jon Daurio, chief executive officer of mortgage investor Kondaur Capital, recently offered a $4,000 check to Barry Culver for the deed to his Bryan, Ohio house.
With the exchange, and a pay-off to a second-lien holder, Culver was freed of $120,000 in crushing mortgage debt on the house, said Daurio, who had bought the right to cut the deal when he purchased the mortgage months earlier. The house, after repairs, is now on the market for $47,500.
"It got me out of a bind," said Culver, a former Kmart employee who has since relocated near his in-laws in Tennessee where job prospects are better. "I got a little cash out of it and was able to pay off other stuff I owed."
Such 'cash-for-keys' offers are common for Orange, California-based Kondaur, one of the largest players in the business of buying and resolving distressed loans for profit. The business is growing more popular, with volumes of loans for sale at their highest since the founding of Kondaur in July 2007, said Daurio, a veteran of the subprime lending industry.
At DebtX, a Boston-based loan exchange, the number of bidders on pools of loans is up 25 percent since last quarter.
July 2007. Smart guy, Jon Daurio. This industry is only a couple of years old, and already it's taking off. Banks don't want to get stuck with it, but these companies are willing to take the risk and willing to service individual homeowners. It's a good idea.
I'm not against free market ideas when the free market, in this case the banks, have failed. Obama's had his shot too. Somebody's wisely picking up the slack here. See a need, fill a need.
But will it be enough?
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