We were watching the news the other day and I learned something that blew my mind.  There could be a clause in your mortgage that allows the bank that holds your mortgage to take any money you have in a “retail account” (checking, savings, ect.) with their bank to pay past due amounts on the mortgage.  They can do this without a court order or your permission.

On the news there was a guy who had gotten behind on his mortgage, it was in foreclosure and he was going to let it go back to the bank.  (Watch the news here) He was a Realtor and his income has gone down dramatically since the market has crashed.  He just plain and simple couldn’t pay it.  He was also getting married.  His mother had given him $2,000 for their honeymoon.  He deposited it in his checking account and a few hours later the bank emptied both his checking and savings accounts, leaving him penniless.

This is legal because of a clause in his mortgage called a “set off”.  Do you have this clause in your mortgage?  I don’t know either.  Luckily I don’t bank with the bank that holds our mortgage, with our first mortgage anyways.  I do bank at the bank that holds our equity line of credit.  While I don’t plan on defaulting on any of my loans, it’s still a nice piece of information to have.

And it’s also good to note that they can claim funds in accounts you hold jointly as well as individually.  Which is doubly wrong.  For example, my husband is listed on my mother in law’s checking account.  It’s 100% her money in that account, my husband pays one bill a month for her out of that account.  Her account is also at the same bank as our accounts.  So if we default on our home equity line, they have the right to raid my mother in law’s account too.  That’s crazy.

It’s so wrong that they can just take every dollar you have without any kind of judgment from a court.  Who knows what you could need that money for?!  Let’s say that my husband got laid off, the sole wage earner of our family of 4.  Let’s say that he couldn’t find a job and we ended up having to foreclose on our house.  Which would be terrible enough, but imagine if the bank then took every penny we have before taking our house.  Can you imagine?  So our family would be without a job, a house, or a dollar.  Terrible!

So the moral of the story, kids…. Do NOT keep your money with the same bank with which you have your mortgage.  And if you do… move it as soon as there is a possibility that you might default.

pic by: Woodleyswonderworks

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