Can a bank take all your personal saving/checking accounts to satisfy a second mortgage?

Deal Score0

Ok, so my friend had a house that had a first and second mortgage. He sold this house in short sale on just the second mortgage as the short sale. The second mortgage became a personal unsecured loan for the remaining amount. A month later the bank sent him a letter saying they will come down on what he owes on the remaining unsecured second if he pays “X” amount by a certain date. So, my friend got an attorney to negotiate a little more and make sure this was handled properly. In the mean time the expiration date passed and the bank took everything my friend had in his checking account and mutual fund account. Yes, it just happens that the unsecured second was in the same bank that he had his checking and mutual fund account. They took everything…even more then what they said they would take as a payoff….way more. Can they do this? Can he get his money back? No where in any letters or paperwork that he signed did he put his personal accounts as collateral or they say his personal accounts are collateral. Is this legal what they did???

  1. Reply
    January 21, 2011 at 5:17 am

    Yes they can do it and not he can’t get it back and yes he owed more since interest and penalties kept accumulating.

  2. Reply
    January 21, 2011 at 5:30 am

    In his loan he likely gave the bank right of ‘set-off’. This means that they can set-off against other accounts he held at that bank for all sums owed.

    He’s likely out of luck, but he should talk to his attorney to see if they can get back what was negotiated before the bank exercised the set-off.

  3. Reply
    January 21, 2011 at 6:19 am

    if the checking,savings and mortgage accounts are all the same entity,…. yes.
    as reported in other answers… right of offset.

    and guess what: if you have accounts at bank a, and bank b, and bank a buys bank b, then your accounts are now all with the same entity and the law applies.
    many people have been caught by this during the past few years; they usually notice when their accounts suddenly get drained to zero and overdraft fees start piling on.

  4. Reply
    January 21, 2011 at 7:06 am

    The terms of EVERY financial account you have EVER opened specifically allows a ‘right of offset’. This refers to a clause that says they CAN seize ANY AND ALL assets you have on deposit with them to satisfy any past due debt. The attorney SHOULD have advised your friend form day one that this was LIKELY to happen. The amount beyond the original payoff amount will be listed as legal fees. Adding legal for collection is legal, but the amount must be ‘reasonable’. Reasonable is the legal term for whatever amount the court agrees to AFTER the fact.

    Another answer stated the loan ‘likely’ gave a right of set off. This in not accurate. That clause has been in EVERY loan agreement AND every deposit account terms for over 30 years. It is NOT likely, it is GUARANTEED.

    Leave a reply

    Register New Account
    Reset Password