What happens when a bank fails?

What happens when a bank fails?:

If a bank fails the FDIC sells it as quickly as possible to another bank. Since it's a firesale sometimes the FDIC has to kick in some cash from its insurance fund. If a buyer can't be found, the FDIC will mail you a check for the insured portion of your deposit. That takes a while so you don't have access to your money - your checks are returned marked 'bank closed'. You have to scramble to make sure your bills are paid.

On the other hand, apparently, if the bank fails, you should continue to make your loan payments. You, apparently, can't mark 'bank closed' on your mortgage slip.

Bankrate: What happens to mortgages, car loans and the like?

Barr: We try to sell as many of the loans to the assuming institution as possible. They leave the dogs, but sometimes they'll leave us with good loans. If an assuming bank doesn't make car loans, for instance, they'll most likely leave those behind with us. Customers should continue to make their payments as usual until notified to do differently.

Hmm. You have to pay ... but they don't. If the deposits (over the insurance amount) are declared null and void and inaccessible, why isn't your loan declared null and void?

I don't understand that.

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