The Great Recession taught us that if a company is in enough financial distress, it can fail. More than 500 banks have failed since 2009.

Fortunately, the mortgagor is protected in the event of a bank or lender bankruptcy. Once your loan is complete and funded, you should not be affected if your servicer or lender goes bankrupt or goes out of business.

What happens to your mortgage when it closes?

Think about what happens to your loan after it closes and see why you are safe if your bank fails or closes. The financial institution that gave you the money—often called the lender—is less likely to keep your loan.

Many borrowers believe that because they get their home loan from a local credit union, bank or lender, the mortgage will always be provided by that lender or bank.

While some of the smaller banks (portfolio lenders) do maintain low-risk home loans, few institutions have the funds to make multiple loans.

As a result, originators sell their loans on the secondary market, where they are pooled and sold to government agencies like Fannie Mae and Freddie Mac. Your home loan may be sold three or four times during the first three months of being created on this market.

The servicer will manage your loan after the sale. Mortgage administrators collect your repayments and keep funds as they own the mortgage or assign it to the loan owner.

Even if your loan is sold, the bank that issued it can continue servicing it.

When a lender or bank is in trouble

Because of the way your loan is managed after closing, if your bank closes -- either the company that issued the mortgage or a third party who later bought it -- it shouldn't affect you or your loan.

Lenders' financial difficulties are never disclosed to borrowers. When a bank's regulations are threatened, the bank's regulator or insurance company takes control. Such a takeover usually results in the FDIC persuading another entity to take over the bank's loan.

If your mortgage is transferred to a new lender or bank, the new owner will be responsible for paying off the debt. In most cases, the institutional investor or service provider that pays your debt will not go bankrupt.

However, if they are in financial difficulty, they will sell or lend your maintenance rights to another party.

If your service provider changes, you will receive confirmation of the change from the old and new service providers. This message tells you where to submit your funds.

Your balance remains the same, as does your repayment plan. Your obligations remain the same. You must pay your debts on time, insure your property, and make sure you pay your taxes.

What if the bank goes bankrupt before it closes?

You're about to foreclose on your mortgage when you realize your bank or lender is in financial trouble. Should you be worried?

The simple answer is no. If your potential lender goes bankrupt, any money you put in an escrow agency should be safe, but you'll have to find another lender.

When a company is on the brink of bankruptcy, lenders typically stop underwriting loans.