In the wake of Pasadena California IndyMac bank being seized by Federal Regulators today, the question most of us are asking is how safe are our deposits whether we were banking with IndyMac, WAMU, Wachovia, Wells Fargo or any other bank?
A quick background for those of you that are not aware of the situation. IndyMac specialized in what many in the real estate industry called "Liar Loans". If you could breathe and sign your name, IndyMac was glad to lend you money to buy a home whether or not you were financially qualified.
Now... I'm being a bit harsh here, but really risky lending practices did get IndyMac in major trouble and put them in a precarious financial situation.
To help IndyMac along, Senator Schumer (NY) caused an old-fashioned bank run when he wrote a letter to the San Francisco Fed President concerned about IndyMac Bank's ability to weather the storm....then, he made that letter public. IndyMac Bank ceased new loan operations, in an effort to manage the loans they have on their books, on Monday. On Friday, the Feds closed IndyMac Bank down.
Read More: Brian Brady's Mortgage Rates Report - July 14, 2008
IndyMac becomes the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC.
Read More: IndyMac Bancorp is Seized
If you have money in IndyMac, what does it mean to you?
If you visit www.IndyMac.com, you will see that there is a link to the FDIC Website which provides some general information. Here's an excerpt:
Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts can be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $250,000 limit.
All accounts that exceed the $100,000 insurance limit, and/or all accounts that appear to be related and exceed this limit, are reviewed by the FDIC to determine their ownership and insurance coverage. If you think you might have uninsured deposits you should call the FDIC Call Center to arrange for a telephone interview with a Claims Agent at 866-806-5919 .
If it is determined that you have uninsured funds, the FDIC will generate and mail to you a Receiver Certificate. This certificate entitles you to share proportionately in any funds recovered through the disposal of the assets of IndyMac Bank, F.S.B. This means that you will eventually recover some of your uninsured funds. The FDIC declared a 50% advance dividend for uninsured deposits.
If you have a home equity line of credit with IndyMac, the word on the street is that it has been frozen and will be reviewed on a case by case basis.
Credit lines to commercial construction contractors also will be frozen pending a review, but construction loans made to individual consumers will not be affected.
Customers of IndyMac's reverse-mortgage subsidiary will continue to have access to their funds. Reverse mortgages provide older homeowners with periodic payments or a credit line secured by their homes.
Read More: IndyMac reopens after seizure
How diversified are your bank accounts? Do you have all your accounts in the same bank? Are you over FDIC insured limits?
I was over at Washington Mutual in San Marino earlier today making a deposit. As I was waiting in line, I heard several conversations about FDIC limits. Everyone is nervous, myself included.
There were long lines today on Lake and Walnut in Pasadena as IndyMac customers were trying to withdraw funds. Some stood in line as long as 4 hours per my conversation with a bank representative of Wells Fargo who has been busily opening accounts all day today for IndyMac customers and others who want to diversify their accounts with various banks. By the way, if you were fortunate to get through the long line and have a cashier's check from IndyMac, Wells Fargo is putting a hold on the money to ensure that it clears.
What can you do to protect your money?
1. Don't keep all your accounts in one bank. Even if you are within the FDIC insured limits, how long will it take for you to get your money? Open several accounts in different banks.
2. Make sure that you are under the FDIC insured limits. FDIC stands for Federal Deposit Insurance Corporation. It is an independent agency of the US government. Its purpose is to protect you against the loss of your depoists if an FDIC insured bank or savings association fails.
FDIC insures all deposits including checking, CDs, NOW and savings accounts.
FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, anuuities, or municipal securities, even if you purchased these products from an insured bank.
Basic FDIC Insurance Amount is $100,000.
The basic insurance amount is $100,000 per depostor per insured bank. Certain retirement accounts, like IRAs are insured up to $250,000 per depoistor per insure bank.
Coverage over $100,000.
You may qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different ownership categories.
The most common ownership categoires are:
- Single Accounts
- Certain Retirement Accounts
- Joint Accounts
- Revocable Trust Accounts.
Call FDIC for more information at 1-877-ASK-FDIC ( 1-877-275-3342 )
You can also calculate your insurance coverage using the FDIC's online Electronic Deposit Insurance Estimator at: http://www.fdic.gov/edie/. Please note, some literature provided by the banks has the estimator at www.fdic.gov/edie. This is not correct. See the link in red above.
Protect yourself with knowledge and keep your money safe!
Posted By: Irina Netchaev - Pasadena California Real Estate Agent- Irina Netchaev & Associates. Irina and her Team of Real Estate experts work in the beautiful Pasadena California specializing in Pasadena Real Estate, San Marino Real Estate, South Pasadena Real Estate, San Gabriel Real Estate, Altadena Real Estate, Alhambra Real Estate, Monterey Hills Real Estate, Arcadia Real Estate, Sierra Madre Real Estate and surrounding communities.