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Ask Money

Bank Failures

Chris Farrell Jul 30, 2008

Question: I know that funds (up to the limit) are safe in an FDIC insured bank, but how much of a hassle is it if the bank fails? When my S&L failed in the 1980’s I sent my mortgage payments to a new address – and then another new address. I now use direct debit and on-line billpay for many of my bills and of course I have a supply of checks and maybe some in the mail. How smooth (or bumpy) is the changeover when a bank is taken over? Mary. Vista, CA.

Answer: I haven’t gone through one personally, but my sense is that there is relatively little hassle in most cases. I’ve been reading blogs of people who have had their bank taken over and so far all the stories are positive. The one area I would be worried about is if you have an adjustable rate mortgage. And that has less to do with a FDIC takeover and more that there is evidence that when ARMs are sold– mistakes get made at reset time.

In recent days, doing some searching on the net, I’ve come across a number of blogs talking about the experience and in most cases I would say the information was that it went surprisingly smoothly.

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