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Mortgage Lenders Raising Yields on Savings Accounts and CDs


In the past couple of weeks, I've been reporting on how several banks with large mortgage-lending arms have been offering some very attractive rates on savings accounts and CDs. The Wall Street Journal came out with an article today about this same issue. According to the article:
Bank officials at the mortgage lenders say the changes aren't related to the recent difficulties they have had trying to raise money in the secondary market to fund new loans, as investors back away from subprime loans and other perceived credit risks. Nevertheless, analysts say the moves should help lenders such as Countrywide that are having trouble raising money in the commercial-paper market.

Here's a summary with links to my posts of the deals being offered by the banking units of some major mortgage lenders:
  • Countrywide Bank: 5.65% APY 12-month CD, 5.50% 3, 6, 9-month CDs, 5.50% savings account (post)
  • IndyMac Bank: 5.75% APY money market account, 5.55% APY 5-month CD, 5.50% APY 12-month CD (post)
  • Washington Mutual: 5.50% APY 6-month Online CD (post), 5.45% APY 8-month branch CDs in some states (post)
  • Capital One: 5.20% APY Money Market Account for Costco members, 5.00% APY for High Yield Money Market (post)

The article also describes the concerns of depositors regarding the financial health of these banks. If you keep below the FDIC limits, you should be safe. However, you have to be careful about maintaining FDIC coverage if you have deposits over $100K at one bank. See my previous post on this issue.

Thanks to the readers who emailed me info on this article.
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Anonymous   |     |   Comment #1
With respect to FDIC insurance and bank failure: I understand that when a bank fails, the FDIC typically sells insured deposits to another institution. My question: is the acquiring bank legally obligated to honor the existing terms of the acquired account(s)? In other words, if a 12-month CD at an APY of 5.65% at a failed bank were to be sold to a solvent instition, must that bank maintain that APY for the duration of the term? Thanks to anyone in the know on this willing to share that knowledge.
Anonymous   |     |   Comment #2
No, they are not required to maintain that APY, although they frequently do.

If they want to change the rate, they must give the depositor notice and offer them the opportunity to withdraw their money without penalty.

Anonymous   |     |   Comment #3
Thanks very much to the anononymous reader who responded to the question I posed above today ay 11:53 am.

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