Mortgage lender can raid your bank account during foreclosure
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05:45 PM Mountain Standard Time on Friday, April 24, 2009[/SIZE]
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By Gary Harper / 3 On Your Side[/SIZE]
PHOENIX -- 3 On Your Side has uncovered a little-known secret when it comes to people going through foreclosure.
You could call this a dirty little secret.
I say that because some people believe what lenders are doing is downright dirty.
Now, as we all know, foreclosures across the nation are at an all-time high. But what you may not know is that your lender just might have the right to raid your bank account before you give the house back.
Like a lot of people Joel Contreras jumped into the housing market when things were hot and purchased a condo in Tempe.
"I bought a property about three years ago when the market was good," Contreras said.
Contreras furnished his condo and loved having a place to call home. But, unfortunately, the housing market plummeted and being a Realtor, Contreras says he lost 70 percent of his income.
"My income plunged and I couldn't sell the place because it lost all of its equity and I tried to do a loan modification but didn't have the income," he said.
Unable to keep up with his mortgage payments, Contreras is giving his condo back to the bank.
He says that's depressing enough, but he certainly wasn't prepared for what happened next.
"When I looked at my bank account and saw that it was all wiped out, it took me a good day to rebound from that," he said. "I was panicking. I was freaking out."
Why? Well, Contreras discovered someone raided his bank account and withdrew nearly $2,100, leaving him penniless.
Just who would do such a thing? Wells Fargo, that's who.
Contreras has a second mortgage with Wells Fargo and says even though they knew he was giving his condo back, he says they took what they could from his account.
"If your lender is the same bank that your checking account is with then they don't need a judgment," Contreras said. "They can just wipe out your whole account."
He's right. In an e-mail to 3 On Your Side, Wells Fargo says, "... State and federal law gives financial institutions the right to claim unpaid and past due amounts owed to them ..."
They go on to say, "This is a common industry practice."
But, Contreras says he never knew about the practice.
"I closed the account, obviously," he said. "If they can keep taking more money without obtaining a judgment, I don't want to leave any money in there."
The worst part is Contreras is getting married in less than two weeks and with no money in his bank account, it's going to be a tight honeymoon.
Keep this in mind if your mortgage lender is the same financial institution as your bank.
from me
