That's a very real statement. According to banking experts we're going to hear it more in the near future. Scary Times!
But what happens if your bank does fail? What does that mean for you? What does it mean for your mortgage? What if you are in the middle of a Short Sale?
First of all, when a Bank does fail the F.D.I.C swoops in and takes over. They don't even ask. They show up on Friday at 5:10 PM in hopes of opening up again on Monday as a new Federal Bank.
The Fed's first job is to find out exactly what the bank has in assets and liabilities. Job # 2 is to make sure that those who have insured deposits have access to those should they wish to draw that money. The third is to start liquidating the banks assets to cover the bills.
When Indymac Bank failed in early July it gave many of us first hand experience on what happens and how. They were closed on Friday, opened on Monday and started handing out money to the insured depositors.
For those that have a Mortgage with the bank, there is no change in your note and terms. You still get to make those monthly payments. Sorry.
For those that had Uninsured Deposits in the bank - You may get up to 50% of your money back. Really! It may take a bit but the feds are working on it.
That may be good news for those that are working on a Short Sale with the bank. Why? Because the Feds are actively looking for anything that can convert to quick cash.
Case in point. We had a buyer looking at an Indymac REO (bank owned property). They made the offer and were told by the bank "We'll get back to you and let you know within 45 to 60 days".
The offer was made right before the bank went under. Suddenly they get a call from their Agent, "The bank has accepted your offer IF you can close in 11 days!"
This wasn't 45 days it wasn't 60 days, it was closer to 14. The dust hasn't settled on the bank failure but the Feds have lit a fire under certain files hoping to yield quick cash. They (the Feds) want their money back.
So if you have a short sale in progress - your banks failure may be a very good thing.
Is your bank set to fail? That's a hard one to say. One of the keys is the amount of Non-Performing Assets it holds on it's books. What's a NPA? The biggest pile might be the mortgages it holds that borrowers are no longer paying on. You might hear words like Subprime, Interest Only and Option ARM.
I'll explain more about the NPA in the next post. In the meantime you can read all about how they hide those assets on their books:
"Level 3, FASB 157, and My 10 Taxi's"
* All images courtesy of The Fail Blog one of the funniest sites on the planet!
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I guess there's a silver lining to everything - the idea that a bank failing might help to close a short sale transaction was "news of the week" to me!
Great stuff in your blog today. I appreciate all the insight. Before everyone runs to their bank and pulls out the deposits in excess of the FDIC limit, talk to your banker or accountant. I THINK there is a way for you to set up multiple accounts and spread your deposits around so they are all insured. For example (Don't quote me, just check it out) you can set one account in your name only with $100,000, then another account in your wife's name only with $100,000, then a third account with you and your wife on it with $100,00 in it. As I understand it, the FDIC insurance is protected at the account level so the entire $300,000 would be safe. Now, if I'm wrong someone speak up and I'll delete this response right away so I don't confuse anybody. Thanks.
I am with Wells Fargo so I am hoping they are okay.
How sad is it that the Federal Government can come in and be more efficient? That should be a wake up to the banks that they need to streamline their processes if the third slowest organization in the world can out-pace them.
scary times indeed. Makes you wonder what risk there is with having you money tied into firms like Fidality, etc. Seem like none of these firms are in the clear.
bad credit commercial loans
I put in an offer for a short sale the first week in August. STILL NO WORD and keep being told it could take 60 to 90 day FROM NOW. Not from when we put it in! What the heck is going on? How can we get this DONE???
BTW, the offer was to INDYMAC!! :(