Home Selling in Sacramento>Question Details

Sclowrysmith, Real Estate Pro in Sacramento, CA

Can a Lender ask to see your 401k regarding a Short Sale?

Asked by Sclowrysmith, Sacramento, CA Wed Mar 9, 2011

I would like to know chapter and verse of a law, Fed or State of California, that prohibits a Bank from asking for the 401k financials of a homeowner Short Selling their property?

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Tim gave a great answer and I can add I would consider consultanting an attorney regarding your rights and it also depends on which side of the transaction you are on, or is this for your client(s)?
0 votes Thank Flag Link Wed Mar 9, 2011
A short sale is a privilege not a right. A bank is under no law, federal or state or otherwise, to grant you a short sale. Therefore, the bank makes the rules. If the bank asks to see your 401K, you have to show it to them if you want the bank to consider your short sale. Now, whether the bank will ask for a contribution from that 401K is totally up to the bank. It might. It might not. And you are also free to negotiate that contribution with the bank.

I will say that I have not seen very many banks going after a seller's 401K. They tend to pay more attention to cash on hand, liquid assets, not your retirement accounts. But PNC, well, that's another story. Much depends on which bank holds your loan and who those investors are and the guidelines from the PSA.

Regardless of what you hear, each short sale is unique.

Elizabeth Weintraub
Broker-Associate #00697006
Lyon Real Estate
Sacramento Short Sale Agent
2 votes Thank Flag Link Wed Mar 9, 2011
I totally agree with Elizabeth. It's a privilege, not a right. (Since when does someone HAVE to agree to take less than what was agreed to in a binding contract???)

But just with bankruptcy, where you declare ALL assets including retirement accounts, it's rare if they would ever ask for any to be cashed out (before you are of retirement age) in order to satisfy a debt.

But as agents, we need to bring a little reality to our world. There was a day where you needed to come to the table with a check, when you were selling a home for less than what was owed. If the sellers can't, they need to come, hat in hand, explain their hardship, and show all their cards relating to their finances in order for the investor to settle for less than what's owed.
Web Reference: http://www.suearcher.com
1 vote Thank Flag Link Wed Mar 9, 2011
Like the others said, there is no law, rule or regulation that prevents the bank from asking to see information about your 401k or any other asset (protected or not). When you ask the bank to take less than what is owed they have to agree to forgive the remainder of the loan if they agree to the short sale (in CA). So, they are within their rights to ask you to put all your financial cards on the table. A short sale is not for everybody as the banks tend to ask for a lot more information they need to decide whether a short sale would be in the investor's best interest. They try to get as much information as possible in the process of evaluating loan modifications and short sales.
1 vote Thank Flag Link Wed Mar 9, 2011
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
My disclosure first, consult with a real estate attorney or tax professional.

I have heard that your retirement account is NOT fair game for most short sale lenders. However there are always exceptions, like if you are nearing retirement or even retired and you have access to the retirement accounts. In those cases it would seem reasonable for a short sale lender to look at your retirement account.
I probably would provide the information and say no if they want funds from your retirement account.

Sam Yee, CA DRE #00975946
Accredited Buyer Representative, ABR
Certified Negotiation Expert , CNE
Short Sale & Foreclosure Resource, SFR
Web Reference: http://www.Sam4Homes.com
1 vote Thank Flag Link Wed Mar 9, 2011
I am guessing the bank that has your mortgage is going to ask to see that you do not have funds anywhere and you are free to say NO to them. Of course, they will deny your short sale if you do, but you can say no. Selling short is not a right, it is something a bank will allow you to do if you play by their rules.
1 vote Thank Flag Link Wed Mar 9, 2011
I give Sue Archer a big thumbs up for her answer. That pretty much sums the whole thing up.
0 votes Thank Flag Link Thu Mar 10, 2011
Talk to a attorney. They would be able to give you the best advice with past cases to support the answer.
0 votes Thank Flag Link Thu Mar 10, 2011
You will need to contract with a local Real Estate attorney ( I have a source if you need one) and get the offical word from them. Anything posted on this site should be considered as ONE source of your data search.
From what I understand (this is my opinion NOT case law to be used in a trial) even if they view your RETIRMENT STATEMENT such as a 401k 403B type investment tool they can not count that as Liquid Asset. AN eTrade stock account which can be liquidated at anytime (with tax penalties of course) or Checking/Savings account is what they are looking to establish in a Short Sale or Loan Mod situation. Those are the funds they have a right to consider in your case.
Hope this helps. Again let us know if you need a good referal source for Real Estate Attorney input in the Sacramento area.
Web Reference: http://www.bhrparkplace.com
0 votes Thank Flag Link Thu Mar 10, 2011
If you're looking for a verse of law, you should call an attorney.

We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states

MARS Disclosure for General Commercial Communications
IMPORTANT NOTICE:
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes Thank Flag Link Thu Mar 10, 2011
They can ask for your blood type. People give me copies of their 401k when they apply for a loan. Why not when they apply to get out of one?
0 votes Thank Flag Link Wed Mar 9, 2011
Why would congress, or a legislature, elected by the contributions of bank holding companies, pass a law that restricted banks from doing such a thing? Your best chance of getting such a law passed would be to get some non bank financial industry corporations who make their money selling 401K investments to lobby for such a law. Legislature, and the Republican controlled congress is not going to do anything to hurt their pet banks, unless their Wall Street bosses want them to do it.
0 votes Thank Flag Link Wed Mar 9, 2011
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Confer with an attorney for any concerns

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Wed Mar 9, 2011
This is a question for an attorney, if you are a member of CAR you can call the legal hot line for free and see if they have an answer. Since each short sale is unique in seller and lender circumstances, both the seller and lender have to decide what information they need and what information they are willing to give out. Best for your client to consult with an attorney and financial advisor that can review their unique situation and develop a plan that works, in some cases the best plan may be NOT to short sale. A short sale is just one option and may not be the best for everyone. If written into the contract that the seller has to approve the terms of the short sale approval letter and the seller does not like the terms then they move on to Plan B.
0 votes Thank Flag Link Wed Mar 9, 2011
Hi Sclowrysmith,

Lots of good advice.

I recently helped a buyer with financing on a short sale and the bank required the seller to sign an unsecured note for $15,000 as a condition of the short sale approval.

Every situation is unique. Be prepared and willing to provide whatever they ask you to provide, if you seriously want the lender to consider your short sale request.

Best regards,

Elva Wormley
Cobalt Financial Corporation
0 votes Thank Flag Link Wed Mar 9, 2011
Short sales have complicated legal and tax consequences. Consult an attorney (or advise your client to do so in this case). You should NOT be giving legal advice in these situations. Then, have your client let you know what the reputable, knowledgeable attorney says. Make sure it's someone familiar with real estate foreclosures and short sales.

I don't think this is the forum for your answer.

Good luck.
Web Reference: http://SoldByErin.net
0 votes Thank Flag Link Wed Mar 9, 2011
Sclowrysmith AGENT,

I love Elizabeth Wen... she is awesome and sharp with her real estate knowlege. I don't think she got that knowledge by demanding people to give her information by chapter and verse of the law, Fed & State of California as you have requested.

I'm sure she has attended classes, seminar, read books, read case law, spoke to several lenders, attorneys, etc She may have lost sleep, missed a party or two to get the knowledge that she has. You know she probally read the buyers loan documents (from front to back) from every bank that exists today and the one we no longer see. She has probally taken Foreclosure 101 class 2-3 time before the crisis, and several times in the crisis.

With all this I'm saying you need to do the same. Learn and find out for yourself!

WHILE YOU ARE LEARNING:
Why don't you find for me chapter and verse of the Fed and State of California that says that THEY HAVE TO DO A SHORT SALE.

If you are in a situation find a way to negotiate a way for them NOT to not take/ask for the money. They may just want to simply just LOOK at it.

OK, I'm done Peace to ALL! ; )
0 votes Thank Flag Link Wed Mar 9, 2011
They can ask you for whatever they want, it is their money. You should have anything to worry about if you have a true hardship and arent hiding a big chunck of change somewhere.
0 votes Thank Flag Link Wed Mar 9, 2011
Hello if you are nearing the age of retirment or already retired the Bank would have an incentive to ask you. Like we said a short sale is not a right it has to be approved first by the bank
0 votes Thank Flag Link Wed Mar 9, 2011
In the past, I have heard of lenders asking for a 401K contribution as part of the negotiations. However I haven't seen that in a while and I think it is pretty uncommon. Like the other agents mentioned, they usually are more interested in your cash and liquid assets.
Web Reference: http://www.lisajonsson.com
0 votes Thank Flag Link Wed Mar 9, 2011
Of course they can ask for the seller's information, assets, company of all financial records.

Disclose everything.

There have been many, many short sales closed this year with people making millions in our area, but have a justifiable hardship.

If your clients or yourself can prove the hardship, disclose all the information and not worry.
It never benefits anyone to "hide" assets or funds.
0 votes Thank Flag Link Wed Mar 9, 2011
Hello,

While they do have the right to look at all your assets, most 401K plans are protected and the banks usually can not ask you to cash out your retirement accounts.
0 votes Thank Flag Link Wed Mar 9, 2011
The bank will generally require full disclosure of all financial info, including assets (income, retirement funds) and liabilities. It depends on the bank - not all do ask for retirement accounts but they can. When you got your original mortgage you probably shared this information with the bank at their request.

I would check with the Department of Real Estate or contact Consumer Affairs in Sacramento.
0 votes Thank Flag Link Wed Mar 9, 2011
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