If My Lender Goes Bankrupt, Do I Still Have To Make My Payment?

Posted on September 29 By Justin McHood

One of the most common questions that I hear as the number of banks begin to fail increases is "If my bank goes out of business, do I have to keep making my mortgage payment?"

Hmmm. Before we answer that question, let's review a few things that you agreed to when you took out your loan.

When you took out your mortgage, you were required to sign a document called the "mortgage servicing disclosure" which is a standard document stating that the lender who is originating your loan will most likely not be the one who services your loan for the entire term of the loan. In other words, the bank that first has your loan is most likely going to sell the rights to collect payments on your loan to another bank.

And then they will most likely sell those rights to another bank from time to time -- and then that bank will also sell them to another bank, etc.

When you ask most people "have you ever had your mortgage sold?" the most common reply is "yes" and then they tell you how much they liked one bank and hated another for <insert reason>. The important thing to remember when thinking about your loan being sold from one bank to another is that although the lender that you make your payment to may change, the terms of your loan can't change.

In other words, you can pretty much count on making the same mortgage payment regardless of who you make it to.

Use this same logic when thinking about the question of "what happens if my lender goes bankrupt, will I still have to make my payments?" and the answer is Yes.

Yes, you want to keep making your payments because should your lender fail, a new one (if no one else will it will be the FDIC) will be in charge of servicing your loan (collecting your payments).

In other words, it really doesn't matter all that much who the lender is that you make your payments to - if you miss a payment it will impact your credit and if you keep missing your payments and don't get a loan modification, you may ultimately end up in foreclosure.

So you want to make sure that you keep making your mortgage payment.

Regardless of who is collecting it.

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