A Flagstaff homeowner asked me last night, will my mortgage have to be repaid immediately if the bank that holds it goes under? If this question had been asked in 1932, the answer would be, “yes.” Back then, your house was an asset of the bank until you paid in full. If the bank went under, the bank’s creditors got the house if you couldn’t pay the balance immediately. Nobody liked that situation – the creditors wanted their money and you wanted the house. So mortgages (or, in Arizona, trust deeds) were created that made the asset the income stream from your house payments instead of the house itself. If a bank goes under these days, the mortgage notes (homeowners’ promises to pay) that it holds are the assets transferred to bank’s creditors, who are usually other banks. The value the creditors get from the mortgage notes is based on the “present value” of your future payments. If the bank holding the note secured by your mortgage (or trust deed) goes under, you are in no danger of losing your home as long as you continue to make the payments. You will be notified that you should send your payments to the new owner of the mortgage. (This is probably familiar to many people because mortgages are bought and sold routinely even without the current owner filing bankruptcy.) What if you have a brokerage account, and IRA, or your life savings with Lehman Brothers? It’s also safe, but for different reasons: What Lehman's collapse means to you. | 
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