IndyMac Suffers Bank Failure - Do You Still Owe Your Loans?

The latest victim of the mortgage meltdown is California bank IndyMac. The bank was closed last Friday (July 11, 2008) by Federal regulators after increasing defaults and bank withdrawals. Some speculate the fire was fueled after Senator Charles E. Schumer (D-N.Y.) publicly announced the bank was in trouble causing many IndyMac customers to withdraw their money.

After the failure, thousands of IndyMac customers are working to get their deposits from the bank. What about the bank's loan borrowers? Do they still have to pay their loans?

According to the FDIC, loan borrowers are still responsible for making their loan payments as outlined in their loan agreements. If you hold an IndyMac loan, your loan terms will not change. You could continue to send payments should continue to be sent to the same address unless otherwise notified.

Delaying or quitting your loan payments could have devastating effects on your credit. Late payments are reported to the credit bureaus, included in your credit report and score, and can cause interest rates on your credit cards to go up (see universal default).

If you were planning to borrow against your home equity line of credit (HELOC), you'll have to wait. Individual HELOCs have been frozen, until the FDIC reviews them.

Delinquent mortgage-holders get a bit of good news. An FDIC spokesperson says the bank will put a hold on foreclosure proceedings and try to help troubled borrowers keep their homes.

More on IndyMac and Bank Failures From About.com Banking/Loans:

• Old Fashioned Bank Run Finished IndyMac
• What Happens in Bank Failures
• How Bank Runs Work, Why They Happen (and why you shouldn't rush out to withdraw money from your bank)