What if the bank fails?

What happens to the mortgage in the event of bankruptcy?

the subscriber It represents one of the most important financial obligations that a person can bear in his life, being a long-term loan of a large economic size. However, in context banking crisisThe question may arise of what happens to the mortgage in the event of bankruptcy.

In this scenario, it is necessary to know the preventive measures provided by law to Ensure the security of savings And from financing In case of bank failure, in order to avoid negative consequences on their economic situation.

In this guide, we break down What happens to your mortgage if the bank goes bankrupt? Who spent it and what strategies and options are available to protect their interests in the event of a banking crisis and bank failure.

What happens to the mortgage when the bank fails?

Buying a home is an important step and involves a large financial commitment that is required in most cases Signing a mortgage. What recently happened to Credit Suisse, which was engulfed in the Silicon Valley bank collapse, has unsettled investors, insiders and many clients around the world. This is why it is legitimate to ask what happens if the bank fails.

In general, when a bank is in trouble, it comes Acquired by a new banking group. In this case, For borrowers, nothing changes except the name of the lender. The new bank would send a letter to the clients advising them to purchase the debts and credits of the previous bank and the mortgage payments would have to be made in accordance with the original arrangements.

On the other hand, if the bank is not taken over, one will step in Court procedures (exceptional administration) To recover debts from clients. Until 2015, in the event of a bank default, the Bank of Italy intervened and the borrower became indebted to the state. With the entry into force of the “Save Banks” decree, the hypothesis of receivership and liquidation of the bank by the court is an extreme hypothesis. In any case, the borrower will have to respect the previous amortization plan and will not be able to hope to cancel the debt: the installment, the interest rate and the term of the loan will therefore remain unchanged.

In this circumstance, it is possible to renegotiate the loan with the new institution or to request the “portability” of the loan through solutions. In practice, the debt can be transferred to another credit organization that offers more favorable conditions.

How do you do? Simple: Once you have determined the loan that best suits your needs, you can request solutions from the new bank. Someone who always makes regular mortgage payments should have no problems, and the transfer of your mortgage to the new bank will be effective in a few months.

Unpaid mortgage payments, what happens if the bank goes bankrupt?

The situation becomes complicated if there is a file The borrower faces difficulties in making mortgage payments and the bank fails.

Not only will the debt remain due, but the borrower can also be reported as being Bad motive.

But there is still hope. If the bank buys out the failing bank, it can decide to value the non-performing or bad loans below face value. In this case, the borrower can negotiate a deal with the new bank «to balance and extracts» to pay off debts. For example, the new bank could buy a debt of 100,000 Euros for 50,000 Euros and the borrower could offer to pay off the debt by paying back 60,000 Euros.

What happens to the mortgage in the event of bankruptcy?

Another frequently asked question from anyone who has a mortgage loan What happens to the mortgage if the bank goes bankrupt?.

the Mortgage agreement It is not affected by bank failure and remains valid. This means that the borrower will not have to worry about having to pay off the debt immediately.

However, you will still need to pay interest and amortization to the new existing bank or institution. All contracts related to the loan are then transferred to the new bank.

The mortgage can only be canceled by the notary with the approval of the bank through the General Electricity Corporation and when a certificate is issued, it is sent to the competent offices.