My Bank Failed; should I pay my mortgage?

FDIC closed 5 banks overnight

When the Fed closes a bank it is always on a Friday night and last night was no good Friday for 5 US banks that were shuttered  bringing the grand total of bank failures in the US since the Great Recession began in ’08 to 350. Last night the FDIC closed the following banks;

Heritage Banking Group – Carthage, MS
Rosemount National Bank-  Rosemount, MN
Nexity Bank – Birmingham, AL
New Horizons Bank – East Elijay, GA
Bartow County Bank – Cartersville, GA
Superior Bank – Birmingham, AL 

Of the 11 year history that is available for download the FDIC has closed 377 banks and institutions in TOTAL and just 27 in the 8 years prior to the so called meltdown in September 2008.  Although the 2011 total number of failed US banks now stand at 33 this is a significant improvement from 2010 when the FDIC had shuttered 50 by the same time last year.

FDIC Bank Closing Information for Superior Bank Birmingham AL

Superior Bank of Birmingham AL is the largest of the overnight failures with 2.7 billion in assets and 3 billion in deposits seems to be caught in the same problem that has dragged down most regional and community banks; bad mortgage loans and the company had been operating under an agreement with the Office of Thrift Supervision to improve capital reserves and reform lending practices.

Judging my the recent departure of more than 20 of Superior Banks mortgage team it would appear they weren’t too happy with the new lending reform.

What happens if my bank fails?

The  FDIC is often appointed as receiver for failed banks. The Federal Deposit Insurance Corporation is an independent federal agency created in 1933 to promote public confidence and stability in the nation’s banking system.

Throughout its history, the FDIC has provided bank customers with prompt access to their insured deposits Whenever an FDIC-insured bank or savings association has failed.  No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.

This page contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how your accounts and loans are affected, and how vendors can file claims against the receivership. Failed Financial Institution Contact Search displays point of contact information related to failed banks. Unclaimed Funds are tracked by the FDIC here.

Should I keep paying my mortgage?

When a bank fails the first question I receive after “is my money safe?” is “Should I keep paying my mortgage” and the simple answer is YES! The bank failed and it’s assets (your mortgage, car, boat and other loans) are assumed by the receiving bank .

The terms of your loan will not change, because they are contractually agreed to in your promissory note. Checks should be made payable as usual and sent to the same address until further notice.  If you have further questions regarding an existing loan you shuold contact your loan officer. You will not receive any email notification to claim/unlock/unsuspend your account or to provide any private information. Please be aware of any Phishing Scams to obtain information from you.

Ricardo Cobos is a mortgage loan officer in Raleigh North Carolina specializing in low down payment and low interest mortgage loans.