Pay for Performance

With nearly one-fourth of Americans underwater on their mortgages and home prices still on the decline, homeowners who resist the temptation to strategically default and make efforts at meeting their obligations should be applauded. Loan Value Group, a firm in Rumson, NJ, has been experimenting with the idea. It has a program, called RH Rewards, through which banks, mortgage servicers, hedge funds, insurers -- pretty much any institution that carries mortgage risk -- can offer a financial incentive to their underwater customers, mainly targeting those who remain current on their mortgage. Rewarding people just for doing the bare minimum, for following through on promises made of their own volition, feels unsettlingly un-American somehow. But RH Rewards also borrows from that most American of ideas -- using financial incentives to drive desired behavior. Loan Value Group touts that RH Rewards is used in 40 states, offering more than $113 million in rewards covering $1 billion of mortgages.