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Bank Folding Up Question

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Bank Folding Up Question

Unread postby theragtopguy » Wed 05 Mar 2008, 18:45:14

What happens if the bank holding your mortgage folds up?

For example, Bank of America recently bought Countrywide Mortgage, so what would happen to those mortgage holders and their houses if Bank of America went belly up?
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Re: Bank Folding Up Question

Unread postby joeltrout » Wed 05 Mar 2008, 19:12:55

Check out what this guy did in Florida. He hasn't paid his mortgage since 2002.

LOOPHOLE!!!!


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Re: Bank Folding Up Question

Unread postby Daculling » Wed 05 Mar 2008, 19:15:20

They don't hold a lot of mortgages. They were sold to the smart Wall Street fellas who bundled them up into mortgage backed securities and sold them to Norwegian municipalities and pension funds... but not before they sliced them into tranches to spread the risk around.

The few they do have would be considered assets when FDIC stepped in I think but I don't see how they liquidate that with no market as is now.

No you don't get your home for free :)
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Re: Bank Folding Up Question

Unread postby joeltrout » Wed 05 Mar 2008, 19:18:22

$this->bbcode_second_pass_quote('theragtopguy', ' ')if Bank of America went belly up?


If an institution like Bank of America went belly up the US would be screwed. We aren't even close to something like that happening.

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Re: Bank Folding Up Question

Unread postby theragtopguy » Wed 05 Mar 2008, 20:19:54

$this->bbcode_second_pass_quote('joeltrout', '')$this->bbcode_second_pass_quote('theragtopguy', ' ')if Bank of America went belly up?


If an institution like Bank of America went belly up the US would be screwed. We aren't even close to something like that happening.

joeltrout


Not yet, but it may come to that.

Does anybody know the actual answer to the question? Would the Bank immediately call in the loan? What the hell would happen?
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Re: Bank Folding Up Question

Unread postby lawnchair » Wed 05 Mar 2008, 20:21:30

I know it's impossible. But, anecdotally, I'm curious how ol' BofA is doing. Today in the mail I got four "please spend our money" letters (two "convenience check" mailings, a "consolidate or home improvement" LoC offer, and an offer for another credit card) from them alone. That's 8 BofA credit pushes this week, along with another dozen from other lenders. My rating is good, so I get plenty of junk mail, but this is kinda ridiculous.
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Re: Bank Folding Up Question

Unread postby joeltrout » Wed 05 Mar 2008, 20:29:55

$this->bbcode_second_pass_quote('lawnchair', 'T')oday in the mail I got four "please spend our money" letters (two "convenience check" mailings, a "consolidate or home improvement" LoC offer, and an offer for another credit card) from them alone.


I have noticed the same thing. We started getting the "checks" before the holidays which I thought was for holiday shopping but the checks are still coming on a regular basis.

Surely people do not use them and get charged crazy rates.

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Re: Bank Folding Up Question

Unread postby scienceteacher » Wed 05 Mar 2008, 20:37:53

I too get loads of BofA checks. I just telephoned them and said stop sending them - and they said they would stop sending them!
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Re: Bank Folding Up Question

Unread postby ColossalContrarian » Wed 05 Mar 2008, 20:42:33

I told them that if they send me anymore checks I'll spend them all and not pay them back....EVER.... but they still keep sending checks...

I need a new TV, PS3, and some gold... I'd probably make money spending those checks on gold. Wouldn't I?
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Re: Bank Folding Up Question

Unread postby Daculling » Wed 05 Mar 2008, 21:15:11

BOA has 26 Trillion in derivative exposure. Second highest on the list after JP Morgan. Think about that.
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Re: Bank Folding Up Question

Unread postby pup55 » Wed 05 Mar 2008, 22:32:42

$this->bbcode_second_pass_quote('', 'W')hat happens if the bank holding your mortgage folds up?


I am not an authority on this, but I would say that the statement above is probably correct, a lot of the mortgages are no longer held by the banks, having long since been sold off to some Saudi prince,

But if a bank still is holding your mortgage, and it is still "worth something", it is an asset of the bank, and will be sold off to whoever the new owner is, when the bank;s "assets", if any, are split off among its creditors.

My mortgage, for example, is worth something, I pay on it every month, it is backed up by a house with some value in excess of its face value (apparently) plus if things look bad I will just pay it off, so it is an asset that has a value. So if my bank or financial institution goes under, my mortgage will end up being held by whoever buys out the performing assets of the bank.

However, the problem is, a lot of mortgages are not worth anything right now: The people are no longer paying, and they are backed up by a house of unknown value. According to the talking head on Savinar's site this afternoon, there could be as many as 9 million people "upside down" right now, and I would estimate that there could easily be twice that many, so these mortgages are essentially valueless right now.

So at some point, there will have to be some way to separate out the "real mortgages" from the others, and write the others down. No one wants to be the first to do this, because no one knows the price of a house anymore.

What will happen to those mortgages is anyone's guess except to say that there might be a second deep discount sale at some point, to someone who is willing to take the risk, if the price is right, to own this mess.
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Re: Bank Folding Up Question

Unread postby theragtopguy » Wed 05 Mar 2008, 23:11:15

$this->bbcode_second_pass_quote('pup55', '')$this->bbcode_second_pass_quote('', 'W')hat happens if the bank holding your mortgage folds up?


I am not an authority on this, but I would say that the statement above is probably correct, a lot of the mortgages are no longer held by the banks, having long since been sold off to some Saudi prince,

But if a bank still is holding your mortgage, and it is still "worth something", it is an asset of the bank, and will be sold off to whoever the new owner is, when the bank;s "assets", if any, are split off among its creditors.

My mortgage, for example, is worth something, I pay on it every month, it is backed up by a house with some value in excess of its face value (apparently) plus if things look bad I will just pay it off, so it is an asset that has a value. So if my bank or financial institution goes under, my mortgage will end up being held by whoever buys out the performing assets of the bank.

However, the problem is, a lot of mortgages are not worth anything right now: The people are no longer paying, and they are backed up by a house of unknown value. According to the talking head on Savinar's site this afternoon, there could be as many as 9 million people "upside down" right now, and I would estimate that there could easily be twice that many, so these mortgages are essentially valueless right now.

So at some point, there will have to be some way to separate out the "real mortgages" from the others, and write the others down. No one wants to be the first to do this, because no one knows the price of a house anymore.

What will happen to those mortgages is anyone's guess except to say that there might be a second deep discount sale at some point, to someone who is willing to take the risk, if the price is right, to own this mess.


Thanks for the answer. That actually does make sense.

I guess since things have never been this bad before we're heading into unknown territory.
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Re: Bank Folding Up Question

Unread postby jlw61 » Wed 05 Mar 2008, 23:15:47

$this->bbcode_second_pass_quote('theragtopguy', 'W')hat happens if the bank holding your mortgage folds up?


To answer the actual question.... Mortgage law is a state by state issue with some federal controls on how things are handled. However, your actual question would be a state law issue.

TYPICALLY an entity that buys your mortgage contract, even if it is bought in a fire sale, is bound by the terms of the contract. In some states, they may have the ability to force a renegotiation. Here in Virginia, they are absolutley bound by the original contract. Back in the 80's when I lived in Wisconsin, a friend lost his farm after the bank sold his mortgage to another company and they forclosed on him.

So, first, what does your contract say? Does it say anything about forcing a forclosure without cause? A meal-time discussion with a friendly real-estate agent may answer your questions regarding your state.
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Re: Bank Folding Up Question

Unread postby pup55 » Thu 06 Mar 2008, 00:07:26

$this->bbcode_second_pass_quote('', 'T')YPICALLY an entity that buys your mortgage contract, even if it is bought in a fire sale, is bound by the terms of the contract.


I just remembered one other thing, and Seahorse is an authority on this, so we will defer to him if we are wrong...

But in some states, and on some mortgages, the mortgage may be "recalled", which is to say, the bank has the right to ask you to pay the whole thing off at any moment, if certain conditions are met. I think one or two of my old loans in Texas were like that, my current one is not like that.

But I suppose that if the bank had their back against the wall and needed to raise cash, they would "recall" everything they could, and if the owners would have to either pay it off or refinance somehow.

Currently it would be pretty senseless to do this. Mostly, people would just say "you want my house come and get it", and walk, The frugal of us would just pay off what little they owe, and everyone else would be good and ticked off, which is why this scenario is unlikely.

Edit:

NYTimes

Here is a case from back in the 80's where this actually happened, and it ticked a lot of people off up in New York.

In this case, it was because the mortgages were written at 7% and the interest went up to 15%. Those were the days.
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Re: Bank Folding Up Question

Unread postby aahala » Thu 06 Mar 2008, 12:25:02

$this->bbcode_second_pass_quote('theragtopguy', '')$this->bbcode_second_pass_quote('joeltrout', '')$this->bbcode_second_pass_quote('theragtopguy', ' ')if Bank of America went belly up?


If an institution like Bank of America went belly up the US would be screwed. We aren't even close to something like that happening.

joeltrout


Not yet, but it may come to that.

Does anybody know the actual answer to the question? Would the Bank immediately call in the loan? What the hell would happen?


The terms of your contract are the terms of the contract. They
don't change with ownership. It's very unlikely, but possible,
that your mortgage had a clause stating "if we sell the mortgage"
something or other happens.(But such a clause would be
part of the original contract terms stated in your contract)

Your loan number, where you send your payments and that
sort of thing can and probably will change.

Trying to get ahold of someone to find out the straight dope
on your loan, that can be a very big problem. I worked for an
S&L for many years and had to work with such purchased loans
and assets taken over by the FDIC, the FSLIC and so forth.
Can be very difficult.
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