Q&A: Money in the Bank

Q: If I want to do a short sale and I have money in the bank (let’s say $10,000) can my lender take that money from me?

A: I have some good news and some bad news.

Good news: No, a lender cannot force you to withdraw money from your personal accounts to give them if your home is upside down. Nor can they withdraw money from your accounts if you are in default. Their hands are tied in relationship to other assets you may have, they only have control of your house.

Bad news: You can’t force them nor compel them to approve a short sale IF YOU HAVE $10,000 IN THE BANK. But they do have control of your HOUSE. They can—and will—refuse to allow the short sale to close unless you have demonstrated that you have no resources with which to cover even part of the shortage.

So, I expect your question then becomes, “How would they know what I have in the bank?” And the answer is: you have to tell them. In order to even be considered for a short sale you must provide details of your finances through an extensive hardship package. They will usually ask for the last 2 years’s tax returns, most recent 3 months’ bank statements, savings accounts, etc. (You should keep in mind that your loan application detailed what accounts you had). You will also be required to sign stating that you are telling the truth.

The servicer has an obligation, imposed by the guarantor, to be sure that you DON’T have resources to offset the anticipated loss before they agree to let you close. It’s that catch 22 thing again, you ain’t got enough money, but you are blocked because you do have money.

Likely outcome: They will most likely agree to a short sale provided you cough up the $10K. I said they can’t just take it, which is different than refusing to play ball until you fork it over.

I encourage you to watch INtro #5 “What’s a Hardship Package Anyway?” It’s available, FREE, at www.HOMwebinar.com

Good luck!

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(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)