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Bank Failure & My Loan

Detective Krum

What happens to loans when a bank fails?  Some people suggest you do not have to pay your loan once a bank fails.  According to FDIC, you are still obligated to pay your loan.

Here is FDIC’s explanation of what happens to bank assets and outstanding loans.

  • Prior to a bank’s failure, the FDIC offers some or all of the failing bank’s assets for sale to healthy financial institutions upon the bank’s closing.
  • Loans not sold in the initial sale are packaged and offered for sale to the broader financial market, typically within a few months of the bank’s failure.
  • Until the FDIC sells your loan, it undertakes the associated servicing responsibilities.

You have a loan with a bank that just failed.  The loan could be a car loan or mortgage, business loan or whatever. What if FDIC sells your loan?  FDIC’s reply to that question is explained below.

  • Holders of loans, including the FDIC, routinely sell performing and non-performing loans in the financial markets.
  • If the FDIC sells your loan, either at or subsequent to the time your bank is closed, the FDIC and the new owner will send you a notice of the transaction, with payment mailing instructions.
  • The sale does not affect the terms of your loan. The new owner of your loan:
    • Must comply with all state and federal laws with respect to the ownership and servicing of your loan, including the Fair Debt Collection Practices Act,
    • Is entitled to collect all principal, interest, and other amounts owed, and
    • Assumes the receiver’s obligations and commitments.
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August 30, 2010 - Posted by | 1, Victory 1 News | , ,

6 Comments »

  1. i hate car loans because sometimes that interest rate is not very fair’`.

    Comment by RF Modulator : | October 27, 2010

  2. Banks appear to base interest rates on credit scores – is that fair? I don’t think so because sssn# , by law, are tax payer identification numbers. What a taxpayer ID number has to do with getting loans is, in my opinion, a misuse of power.

    Comment by victory1project | October 28, 2010

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