Should you keep your life savings in the same bank that holds your mortgage?

[CreekDog]

...or if that banks holds your other loans?

Apparently they do have the right to take your money to pay off a debt that you owe them. (perhaps not in a non-recourse state --meaning all they can do is take the house to settle the mortgage).

Especially considering the reports of people who have perfect payment histories suffering foreclosure actions, the prospect of losing the money they have in the bank is pretty scary.

However, it seems like there's lots of choices and one can easily put their savings into one bank/credit union and their loans in another.

What do our experts think about this?

[littlewolf]

1. in most cases banks sell mortgages back and forth ..

We got our mortgage and 2 weeks later they sold it to someone ... and it has been sold like every 2 years ...
between like 3 different banks ....

[DBoon]

5. yes, like we have a choice

it doesn't matter who we start with, the mortgage gets transferred so many times it hurts.

Of course, our small neighborhood bank has become part of Chase (after 2 prior mergers with progressively bigger entities)

[demosincebirth]

23. Exactly like mine. Its sold so often I lost track who I send the payment to.

[JVS]

2. If The Dukes of Hazard has taught us anything, it's that the relationship between mortgage holder...

and borrower is in reality a extended period of low-level warfare.

[Gothmog]

3. It is called the right of offset

Any bank holding your CDs and banking account can offset moneys owed to that bank. The bank needs to be the actual holder of the note and in most cases, the notes are held in CDOs and mortgage backed securities and so the bank is not the holder of the note.

[Xithras]

12. ^This. Even in non-recourse states, they can drain your bank accounts.

What's more, they can do it without even instituting foreclosure proceedings, and WITHOUT NOTIFICATION.

Remember those stacks of papers you signed when you took out your mortgage? You gave them permission in there. It was also on your credit card application, your personal line of credit forms, etc. If you have an overdue balance in one account, and you have cash in another, they can raid your accounts to take the money. EVERY bank does this, and it's perfectly legal.

You should never have your "debt" accounts (credit card, mortgage, etc) at the same bank where you keep your savings.

[JackintheGreen]

4. My "banking" bank bought my mortgage bank

What then? Change banks? And then it happens again?

10+ years ago I changed banks 3 times in two years because my local banks kept getting bought by ethically bereft conglomerates. After the 4th time I gave up. And it's only worse now.

My heart says yes, but good effin' luck.

[ProgressiveProfessor]

16. Do your personal banking at a credit union

Unless they originated the mortgage, they rarely if ever hold them.

[JackintheGreen]

18. I've been trying to get the wife on board for years

and she won't budge (yet).

Hopefully I'll get an academic post for next fall and we can start again at a CU.

[jwirr]

6. Debt counseling because I am too broke to go bankrupt: get your

direct deposits out of the bank and stop payment because they can take anything left in their bank. I would assume that goes for savings also. I did not have any. The bank will hound me to death but at least now I will have enough to pay the rent and heat. I did not want to do this but being homeless is not a good situation either.

[Hawkeye-X]

14. Same here, different direction

We're 3 months into the debt settlement, and it will take 3 years before all the outstanding bills are paid off. The settlement company (local, and I checked them out throughly before signing on) has kept me updated, and even questions some statements that I sent that wasn't part of the settlement, and asked me if I wanted to include them - I said yes, and they asked me how much I was willing to pay. I gave them the maximum dollar amount they would be allowed to take out every month, leaving me with less than half of the money I get with my SSDI. The good news is that my wife has actually amassed enough money that she doesn't need to "borrow" from me (usually I do a large transfer every month to her so she can handle the bills) - she actually encouraged me to keep the money. I have one more obligation to my parents (deductible since I damaged their car) then I will be good with money by June of 11, G-d willing.

Hawkeye-X

[TBF]

7. Well my grandpa wasn't an expert, but he was pretty sharp.

Kept most of his money in a small bank, paid off the farm as quick as he could, and kept a tidy sum in the safe in the basement (huge old thing). He had lived through the depression and did not trust banks, especially the large ones.

[truebrit71]

8. No. In fact, fuck no. Keep them in totally separate financial institutions.

.

[taught_me_patience]

9. You shouldn't have your life savings in a bank - period

It needs to be in a diverisfied portfolio of stocks, bonds, real estate, precious metals, and cash (or cash equivalents such as a money market account).

[CreekDog]

10. if your life savings amount to 3-6 months of living expenses

you sure as hell better not have it in stocks, precious metals and the like.

if you have 3-5 years of living expenses saved, then of course, a large portion of that should be diversified as you said, but not for small potatoes.

[taught_me_patience]

20. Correct. You should have 3-6 months of living expenses in cash

But at least have it in an online savings account such as ingdirect, hsbcdirect, or ally. 1% there is better than 0% in a checking account.

[truebrit71]

22. 3-6 months? It's hard enough to have 3-4 weeks on hand...

...and more often than not it's much less than that...

[CreekDog]

24. it does seem like cruel advice

telling people to have 3-6 months living expenses in the bank when they are barely keeping fed and sheltered.

for those who have the income to support building up such an emergency fund, it's important that they do since our safety net has a lot of holes in it. and for those who have an emergency fund, it needs to be accessible and stable (probably shouldn't be gold coins in your basement, or 30k in Microsoft shares, etc.)

[malaise]

11. Keep your money in a credit union

Fuck the banks

[Pavulon]

15. Agree. Watch the FDIC limits and place money in federally

backed securities (based on your age and risk level). As others posted, the amount of market risk a person takes depends on lots of factors.

[Hassin Bin Sober]

26. Credit Unions are great but they are probably MORE likely to ....

... exercise their "right of set off" if you are in default on a note.

I've been in retail lending for 20 plus years. An attorney my friend was using for a BK confirmed that for me when I asked if my friend should worry about his checking account at Chase while he was filing on a Chase cc. He said the larger banks, in this particular case CHASE, are less likely to put two and two together - but a small credit union who "feels" losses are more likely to set off.

[Ilsa]

13. I believe certain types of accounts like IRAs can't be used to offset debt,

even if the debt and cash account are in the same institution.

There may be other kinds of accounts that can't be offset.

I welcome confirmation or correction.

[sarcasmo]

17. Savings, what is savings?

[Earth_First]

19. +1

You mean next week's paycheck that I am 'saving' towards outgoing expenses next week?

[Vinca]

21. No, I mean the jar of pennies currently on your kitchen counter.

:rofl: I'm feeling flush because I'm about to start on my second jar!

[sarcasmo]

28. I get the feeling flush, like when you go to the coinstar :) .

[CreekDog]

25. the small amount of money you'll have after you win the lottery and pay off your credit cards

otherwise known as the "American Dream".

:hide:

[Luciferous]

27. We are in the process of doing that very thing. However, our loan

officer has told us that they will probably only hold onto the loan for a month and then sell it to U.S. Bank.