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What Happens When........

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Folks

What happens if you have a mortgage with a financial institution that goes into liquidation?

Do you just carry on making monthly payments or do you stop until you are told otherwise? In effect, if a bank or building society go under, does your loan just end up being written off?

I very much doubt that this would be the case, but what would happen?

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Folks

What happens if you have a mortgage with a financial institution that goes into liquidation?

Do you just carry on making monthly payments or do you stop until you are told otherwise? In effect, if a bank or building society go under, does your loan just end up being written off?

I very much doubt that this would be the case, but what would happen?

I saw a financial adviser answer this very question on Sky News. Basically you carry on paying as you have been. You will be tied to the contract you have with the bank (e.g tie in clauses, fixed ratses etc)The bank fails and will be taken over. The new owners will take over as your creditors. Basically your debt to the bank is an asset as far as its creditors are concerned. mortgagees are in a much better position than depositors

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I saw a financial adviser answer this very question on Sky News. Basically you carry on paying as you have been. You will be tied to the contract you have with the bank (e.g tie in clauses, fixed ratses etc)The bank fails and will be taken over. The new owners will take over as your creditors. Basically your debt to the bank is an asset as far as its creditors are concerned. mortgagees are in a much better position than depositors

Indeed. If you fail to make the repayments because the lender is in liquidation whoever eventually buys the debt may well repossess just to realise the asset as quickly as possible.

The owner of the property has gone bankrupt and the administrator will expect payments from you as normal.

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The bigger question is what happens when your fixed rate deal with a liquidated lender comes up for renewal, and as sub prime borrower no one wants to touch you except at usurous rates?

I guess the answer is that you get reposessed.

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Legally nothing changes. You still owe someone money and you should continue to pay it on the old terms.

However if the company who buys the loan is not someone who is interested in your repeat business, or realises that you are unlikely to be able to move, they are likely to use every loophole and trick to increase your repayments and charge you penalties.

My neighbour had half her loan bought by one of these companies in the last downturn. She saw her repayments shoot up. She worked in the solicitors for this lender and was told that's just what they do.

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The bigger question is what happens when your fixed rate deal with a liquidated lender comes up for renewal, and as sub prime borrower no one wants to touch you except at usurous rates?

I guess the answer is that you get reposessed.

Or you re-schedule the debt as interest-only or go on to a 40 year mortgage, or perhaps there'll be some magic money from the government passed to Housing Associations to buy properties.

Property prices went up not because people were greedy but because there was an excess of money available. Now there isn't an excess of money available prices will decline. This is what I understand to be House Price Inflation (I'm thinking of adding this as a sig.)

Edited by happy?

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