It’s no secret that lenders nationwide are struggling with financial problems too. Nearly 400 lenders (public and private) have folded as a result of our current foreclosure crisis. Many homeowners facing foreclosure are watching as their lender goes out of business. So a big question we get on a regular basis is, “do I have to keep paying for my mortgage if my lender goes out of business”.

When a lender fails, another investor, lender, or servicing company will take over your loan. The terms of your loan and your responsibility to repay the loan are still in place. The terms of the original loan can not be changed by the new owner and they can not impose addition fees or raise your interest rate, unless it was authorized in the original agreement.

If a few rare cases, a property in foreclosure may not be claimed by the buyer. This can happen for different reasons, but it is generally because the property is not worth assuming. In many neighborhoods throughout the country, the property value has dropped so far that it renders the property worthless. The lender may not want to take on the expense of taxes and property upkeep. These properties are considered derelict properties and become a burden of the state/county and tax payers.

In these unique situations, a foreclosure victim may have the ability to claim the home by paying any back taxes. This would essentially eliminate the mortgage on the property and the foreclosure victim would own the home free and clear of any liens. In some states, the property would be sold at a public sale, but if the lender didn’t want the home, there is a good chance no one else would either.

Except for this rare occurrence, and a few other legal foreclosure loopholes, if your lender goes out of business, you will have to continue to make your monthly mortgage payment. If you were in foreclosure when your lender went out of business, your new lender will pick up where the old one left off, and the foreclosure will happen just as fast. However, your new lender may have different policies on helping their foreclosure victims out of foreclosure, so do yourself a favor and call your new lender to find out about their policy to help their clients out of foreclosure.

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