Silicon Valley Bank Query
I read about the downfall of Silicon Valley Bank and had a query about the consequences of the downfall for their customers. Obviously there's a chance that the people who had money in the bank might lose some or all of it. But what happens to the home loans that were given out by the bank? 1) Do the customers no longer need to pay their monthly mortgage and they just write them off since the bank crashed and isn't functional anymore? 2) If they don't write them off who do they need to pay it back to? And what happens to the interest rate? PS: I know nothing about the finance market and this thought just randomly came to me today π
Do you live in the US?
Customers still need to pay mortgage if bank crashes. Mortgages are packed as financial products to be sold in the secondary market. Other banks will buy these mortgage products. Some mortgages are packed as securities for individual investors and organizations.
Customers pay the mortgages which pay back to other banks or investors
FDIC got a new bridge bank opened called "SVB bridge bank". All the US customers of SVB move to the new bank, including the loans. HSBC bought the UK SVB for Β£1. "Obviously people lose some or all the money" Not true. Banks in the US are FDIC insured for up to $250K per customer per account. So FDIC payed all the customers. Now as far as the amount above $250K one *may* lose it, but in this case FDIC stepped in to pay out even that money, so nobody lost money.
I thought the rules were that it was ONLY supposed to be up to 250k, and that they're doing unusual things right now just to prop up general user confidence in the banking system, to prevent others from collapsing
Currently, I believe SVBB has a special 'deal' through FDIC in which there's no limit to insurance to instill user confidence (so that the new bank can function once things stabilize). But generally, FDIC is capped to $250k each. As to OP, even if there's world war 3, loans probably will need to be repaid. Welcome to the banking system. Even if banks fall, the loans/mortgages will still follow you. Just repackaged to some other entity who bought your loan/mortgage.
Bruh, Fed only bail out the big guy, not the normie