Right of Offset-Yet Another Trick Up The Lenders Sleeve

It's the first time I've heard of it - Thanks for sharing - and definitely somethine we need to share with our clients.

I never give clients financial advice however, I have mentioned that I have several bank accounts and move money around as needed.  (Hint, hint.)

I have had this happen to one of my clients.  It has become part of my listing presentation to my short sale clients.  If you have it,  they will find it, especially if you leave it in their bank.  Don't!

This is sorta strange but I guess if the bank has the money and is owed the money, they can take it.  I'm not sure how I actually feel about it.

This happened to my hair dresser.  I was having my "naturally blond" hair streaked (If you believe that, I gotta bridge to sell you!) and she was telling me that she was trying to  work with the "make home affordable program."  Total nightmare...her secondary mortgage is held in a bank sighted as a prime offender and they tried to take the money from her account. 

Obviously, the field she works in is cyclical.   After all, when I get slow - I magically turn less blond and more brunette - amazing how that happens.  Only when it starts to look  tacky, do I have something done.  I'm sure most of us let our hair grow out a bit too.  I know that I do.  I just "make it work" until l it can work no more. Multiply that by about 60 clients and you see the problem. Right now she's working  a couple of different jobs alongside her usual practice.  But things are very tight.  Just taking that money could be devistating and can spell the difference between eating and not.

Seriously - its not funny.  When we cut back - often it is the local merchant or service provider that is hurt the most.  Then the bank just makes sure they are even in more trouble....LOVELY.

Bob -- You come up with the most interesting stuff and the impact is huge.  I wonder how many bounced checks could then occur for an unsuspecting homeowner that the same bank would then turn around and charge an overdraft fee.

now that is great information

thanks for sharing

great to have another arrow in the quiver

Thanks for sharing this info - scary as it is! At least we can help spread the word so our clients can think thru where they may want to keep their money....  And I'm thinking that my grandmother's theory of having some gold buried in her back yard wasn't all that crazy after all!! 

This seems very scary to me. On one hand, they are owed the money.  But, what if an owner just lost a job and needs the money for medical issues?  

Right of offset has been around for decades, it does not apply strictly to banks but credit unions (governed by NCUA) as well, but credit unions CAN offset for a "credit card". The prior knowledge is in your disclosures when you opened the account(s). Seems silly but if they told you in advance they were taking it then you would have beaten them to the money.

Also, keep in mind if you are a joint account holder for your kids or even for your parents (I see this a lot with "estate planning") they CAN take that too. Most times I would say you would have to be over 30 days delinquent as a courtesy before they would "help themselves" but there is no rule that I know of. Some lenders may "freeze" your funds on your debit activity to get your attention and get you to call to make arrangements for the delinquent account. If you are dealing with a short I would advise moving accounts permanently but if a one time late you could probably just call them before you default for other arrangements. 

Not much different than the IRS keeping a tax return for unpaid taxes from a previous year or even for a defaulted Federal student loan.

There would be an exception to the right of offset if a bankruptcy was involved as it could be an attempt to collect in that case speak with the attorney.

Bob,

It shouldn't matter joint owner carries the same weight and whether in first position or second makes no difference but I would review the disclosures on the business account to see if the verbiage varies... ps I am not an attorney ;)

Those sneaky bastards... I'm guilty myself next to repossession right of offset was one of my favs.  

I can tell you from personal experience that YES lenders will do this...even if not in foreclosure or short sale!

Offsets have existed in many Canadian financial institutions for a long time.  It is in the fine print when you open up various types of accounts including bank accounts.

Just another way to be screwed over by the banks.  Thanks for the tip and warning. 

Bob: I've often wondered in the past if banks could do this. I'm not at all surprised. A very good point to bring up with clients during consultation. Thanks for the head's up!

Grateful for being led to your post and this information! Thanks Bob!

Bob - great information for everyone out there!  If I'm not mistaken the same thing can happen if you are filing bankruptcy and you have a credit card balance or other loan at your own bank that you are including in the bankruptcy. 

This is really bizarre.  It just figures that a new law trying to restrict some of the banks nasty practices takes effect, and all they do is invent new ideas to take advantage of their customers.  The game continues.