Mortgage Foreclosure ?

[Tyme2fish]

A friend of mine is going through foreclosure on his house. Bank X has his mortgage. He also banks at Bank X where he has a checking account. Should he remove money from his checking account leaving just a small amount to cover his other expense checks?

I guess my question is: Can Bank X wipe out his checking account balance to try and get at least some money from him in this foreclosure action?

 

[roscoe]

Re: Mortgage Foreclosure ?

Specifically and legally, I don't know.

But a very close friend of mine co-signed for an auto loan for his son.
Son go in arrears.
Bank froze the mothers accounts. They didn't take her cash, just froze her accounts.

I am sure every state has their own laws, and every creditor will do what they can to put pressure on the debtor.

He should contact a lawyer, or just take his cash out, seems it would be easy, and ease a little of the stress he is currently experiencing.

 

[tpenfield]

Re: Mortgage Foreclosure ?

Yes, I would move the money out so that it is not in harms way.

 

[tomdinwv]

Re: Mortgage Foreclosure ?

I would recommend that he check with a lawyer who handles bankruptcy. Most offer a free consultation. A lawyer could answer questions specific to your state. If he isn't comfortable doing that he may be able to contact the state attorney general's office and they may be able to tell him the law reguarding banking in your state. Most states have some kind of free legel aid available too. He could check with them to get answers to his questions. I would not be suprised if the bank could freeze his assets to recoup money on the house. Best of luck to your friend.

 

[bruceb58]

Re: Mortgage Foreclosure ?

Depends on the state but if this is the first loan on the house it would be a non recourse loan and the bank can't go back after him.

If it is a recourse loan, these days it is highly unlikely that the banks will go after him and would have to get a court judgement anyway before thay could actually attach assets.

I would not be suprised if the bank could freeze his assets to recoup money on the house. Best of luck to your friend.

Banks can't do that without a court judgement. IRS would be a different story.

Basically, moving the money around is pretty pointless but do it if it makes him feel better since it is the same bank.

 

[mscher]

Re: Mortgage Foreclosure ?

Often if it's a credit union, he could have agreed - in writing, to let them do so.

If he filed Bankruptcy it may be a whole different animal.

 

[Drowned Rat]

Re: Mortgage Foreclosure ?

It completely depends on the contract language. If it's an older mortgage, pre 2008ish, there is likely nothing in the contract giving the bank authorization to take funds from another account. When all the foreclosures started hitting, many, if not all, banks started to include language that allows the bank to pull funds from other accounts to cover a delinquent balance. If he doesn't know I would absolutely pull that money out of there before he gets too far behind on the payments. The only money that would be at risk is the money he has in other accounts with that same bank. You might also tell him to find out if his bank is even still the mortgage holder. Even though his payments may go to the bank, the mortgage could be owned by another party, Freddie, Fanny, etc? In that case, his money would be safe to leave where it is.

 

[coastalrichard]

Re: Mortgage Foreclosure ?

A friend of mine is going through foreclosure on his house. Bank X has his mortgage. He also banks at Bank X where he has a checking account. Should he remove money from his checking account leaving just a small amount to cover his other expense checks?

I guess my question is: Can Bank X wipe out his checking account balance to try and get at least some money from him in this foreclosure action?

There are two things going on with a mortgage loan. The first is the promissory note. This is a personal promise to pay and always includes a clause that allows the holder to seize any of the debtors assets to cure the default. The other document is the mortgage which places a lien on the real estate to secure the debt. The mortgage holder cannot foreclose the mortgage lien without the note...BUT the note holder has no obligation to look to the property to cure the default on the note. The note holder may, if they so choose, bring suit under the note alone and attack any and all other assets of the debtor. As far as the cash in the bank goes, the answer is YES, the bank can remove money from any and all debtor accounts up to the amount necessary to cure any default. MOVE THE MONEY TO ANOTHER FINANCIAL INSTITUTION.

 

[bruceb58]

Re: Mortgage Foreclosure ?

As far as the cash in the bank goes, the answer is YES, the bank can remove money from any and all debtor accounts up to the amount necessary to cure any default. MOVE THE MONEY TO ANOTHER FINANCIAL INSTITUTION.

If the loan is a nonrecourse loan this can not happen. Again, this depends on the laws of that particular state. For example, in California, they can not grab funds from your bank account.

 

[coastalrichard]

Re: Mortgage Foreclosure ?

If the loan is a nonrecourse loan this can not happen. Again, this depends on the laws of that particular state. For example, in California, they can not grab funds from your bank account.

Non-recourse lending occurs frequently in large commercial real estate lending and other instances where the borrower is other than an individual (partnership, corporation, etc.). There are 12 states that have "antideficiency statutes" that provide that mortgage loans made to finance the purchase of a primary residence must be non-recourse against the borrower leaving the lender only the collateral to cure any default. Illinois is not one of them, so my nearly 30 years of mortgage lending experience leads me to conclude that all the borrowers assets are "at risk". Non-recourse mortgage lending to individuals is extremely rare. In a non-recourse state, if the lender sells the foreclosed property at a gain, great for them, they took the added risk and came out on top. On the other hand, in non-recourse lending if that lender sells the collateral at a loss, the loss is reported to the IRS as income to the borrower and is taxable (other assets of the borrower). And, yes, California is a non-recourse lending state as it relates to financing the purchase of a primary residence. HELOCS and other secondary financing carries recourse.

 

[bruceb58]

Re: Mortgage Foreclosure ?

Illinois is not one of them, so my nearly 30 years of mortgage lending experience leads me to conclude that all the borrowers assets are "at risk".

Not sure why you picked Illinois as your example as we have no idea which state this loan is in.

 

[coastalrichard]

Re: Mortgage Foreclosure ?

Not sure why you picked Illinois as your example as we have no idea which state this loan is in.

Bruce, thanks for pointing out my mistake...was thinking Indiana but the fingers typed Illinois.:redface: I also checked a little further and Indiana is also a judicial-foreclosure state furthering my conclusion that it's a recourse note and mortgage that is being foreclosed. You're suggestion that the document will speak for itself is ultimately correct. I don't think we're going to get any more info relative to the document's contents so my basic assumption could stink. This is a topic of which I have notable experience and only offer my comments as friendly information to the OP.

 

[bruceb58]

Re: Mortgage Foreclosure ?

Richard, I am sure you are correct in your assumptions and the safe play would be to move the funds although I don't think they can be touched without a judgement.

 

[Tyme2fish]

Re: Mortgage Foreclosure ?

Loan is in Indiana. I have no idea what is stated in the original mortgage document as to recourse or non recourse. Loan was initiated in Jan 2006 for $85,000.00. Had a down payment of $3,000.00 and the outstanding balance is still 85k

 

[coastalrichard]

Re: Mortgage Foreclosure ?

With $3K down and a mortgage of $85K, that's a hair over 3% and sounds alot like a FHA-insured loan. If so, it is written on a standard DHUD mortgage that has a note with recourse and a mortgage on the premises. Who is the bank that is foreclosing?

 

[Tyme2fish]

Re: Mortgage Foreclosure ?

Chase Bank

 

[coastalrichard]

Re: Mortgage Foreclosure ?

Gotcha...

 

[Tyme2fish]

Re: Mortgage Foreclosure ?

A member of this board and I have exchanged several private messages offering to assist my friend regarding his foreclosure. I don't want to reveal whom it is so as to retain his privacy. If he so wishes to announce his handle I will leave that up to the member.

A big thanks to all who have replied.

 

[coastalrichard]

Re: Mortgage Foreclosure ?

That's great to hear Tyme. I will have your friend in my thoughts and prayers for a favorable outcome. Good Luck!