CD Rates Summary September 27, 2016
Ranking the Largest Banks and Credit Unions
Why It’s Getting Tougher to Sue Your Bank
Fifth Bank Failure of the Year - Allied Bank in ArkansasMore Concerns of Bank of America's Buy-Out of Countrywide
POSTED ON BY Ken Tumin
There were a lot of news stories today over investor concerns of Bank of America's pending deal to buy Countrywide. As this CNN article describes, analysts have made bearish announcements today regarding this deal. If it does go forward, many think Bank of America will renogotiate the deal for a lower price due to Countrywide's growing mortgage problems.
One reader asked about what would happen to his CDs if the deal falls apart, and Countrywide Bank goes under. If your deposits are under the FDIC limits, you don't have worry about losing any money. However, there is a risk that the receiver of the failed bank decides not to continue the CD term. The new bank is free to close the CD early. The early withdrawal penalty would be waived. This is what happened when NetBank closed last year. As I described in this post some CD holders had their NetBank CDs closed early by ING Direct. On the positive side, you are also free to close the CD early without an early withdrawal penalty (see FDIC FAQ).
One reader asked about what would happen to his CDs if the deal falls apart, and Countrywide Bank goes under. If your deposits are under the FDIC limits, you don't have worry about losing any money. However, there is a risk that the receiver of the failed bank decides not to continue the CD term. The new bank is free to close the CD early. The early withdrawal penalty would be waived. This is what happened when NetBank closed last year. As I described in this post some CD holders had their NetBank CDs closed early by ING Direct. On the positive side, you are also free to close the CD early without an early withdrawal penalty (see FDIC FAQ).
The FDIC gets another bank to assume the deposit accounts. The new bank contacts you directly with your new account number, etc.
The FDIC fails to get another bank to assume the accounts, and then the FDIC begins processing the payments automatically. You as an account holder do not need to do anything. The bank provides the FDIC with all of the account holders' info and address and social security number and beneficiary info, etc.
FDIC asserts they will pay you very quickly after a bank failure (perhaps even within a week or two). They will mail you a check at the registered address the bank had for you.
The only way there would be a delay is if the FDIC needed to verify the validity of beneficiaries, etc. If the FDIC suspected one or more of your beneficiaries did not qualify, they could hold your funds for further investigation, asking you to prove the beneficiary truly does qualify, etc.
The NCUA is the same way.
Not because of doubts over their future or the status of the BofA deal, but rather because their online savings account and CD rates have fallen so much as to make them not competitive with a variety of rewards checking account choices.