Mortgages and Failed Banks

Capitol City Bank and Trust was shuttered last Friday afternoon by the Georgia Department of Banking and Finance. It’s the 3rd bank this year to fail. So what happens if the bank through whom you got a mortgage fails? If your mortgage is like the vast majority, it is often sold on to larger institutions like Fannie and Freddie, who then pay banks to service the mortgages. In cases where the bank servicing your loan should fail, that servicing agreement is a tangible asset that can be bought. Read more about what happens here.

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