If a Bank Fails, You Still Need to Pay the Loan

A lot of banks have failed in the years since the economic mess started. Most of the banks were able to sell the mortgages that they were holding and successfully raised cash to assist their cash flow problems. However, there were also a lot of banks which failed and the FDIC had to step in and sell the mortgages.


Some people are critical of this practice of selling the mortgage, thinking that if a bank fails then they no longer have to pay their mortgage dues. The fact is, whether or not a bank fails, you still have to pay the monthly dues, whether you agree or not.


If you do not pay, and the FDIC sold your mortgage to a new lender, then that new lender has all the legal rights to collect payment from you, whether you agree to the system or not. If you continue to be on default, then you will face foreclosure. Take note, the new lender does not like the processes involved in foreclosures. They lose money, they lose income, and they have to go through the legal processes which can raise a lot of problems for them. Eventually, you will face foreclosure and you would be booted out from your home.


Why should you pay even if you do not know this new lender? The answer is simple, your mortgage is an income generating asset, this means that this asset can be bought and sold at any given time to raise cash for the banks or the lenders. This is the only way they can generate income in a lot of cases. Now as your mortgage comes with a contract of agreement, then the new lender will have its name or company name affixed onto that contract. This means that you now signed a contract with the new lender, it is as simple as that.