> This is actually the reason I'm insuring my house with the same company that holds my mortgage, so at least I don't have to pay the mortgage if they're wiped out in such an event.
How exactly do you think this would work? What jurisdiction is all this in?
I live in Norway, and one difference compared to the US is that here a "mortgage" or "house loan" is really a personal loan with the property as collateral. Even if the value of the collateral is destroyed, the loan remains.
So basically my idea is that to have some of my assets (insurance and some savings) with the same company that holds the mortgage, I have a hedge against the credit risk associated with my assets. If the bank goes bankrupt and cannot repay its obligations to me, I can refuse to pay my mortgage back to them, and demand that any net asset the bank would owe me would be subtracted from the liability I have with the bank.
If my assets were in another company, and that company were unable to pay, I would still be stuck with the mortgage, potentially even if the value of the property were to be lost.
As a side not, I remember working on a credit risk (Basel 2) project back in 2005-2006. Until then, inter-bank lending was (by regulators) considered to have zero-none credit risk, but from around that time, banks (at least in Europe) had to allocate regulatory capital when lending to each other. Then came 2008.
How exactly do you think this would work? What jurisdiction is all this in?