Loan servicers generally aren't in contact with local bank branches. This departmentalization means the servicer probably doesn't have access to the borrower's banking information or to the process in place to exercise the right of offset.
Ties may be closer at smaller banks and credit unions, which, Schreiber says, tend to be more aggressive about tapping deposit accounts to make up missed mortgage loan payments.
"Credit unions are famous for setting off accounts. They're much more aware of how much money is in the accounts because they're smaller and there's a more intimate relationship," he says.
Lenders may be reluctant to exercise the right of offset due to customer service and reputation considerations, says Nessa Feddis, vice president and senior counsel at the American Bankers Association, an industry group in Washington, D.C.
"It's not a customer-friendly thing," Feddis says. "In a lot of cases, they want to give the customer a chance at paying on their own."
If a lender opts to use a right of offset, the amount normally won't be limited to missed loan payments. Late fees, penalties, default interest and, if the loan is accelerated, the entire outstanding balance could be claimed from the borrower's accounts. Essentially, any money in a personal account is fair game, though certain types of business or retirement accounts may be off-limits. In addition, state laws also may govern some rights of offset.
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