Projected Foreclosure to REO Cost Analysis

An REO is a piece of real estate that is owned by a lender but was not sold during a foreclosure auction. When the property owner fail to make their mortgage payments, the bank can seize their property and attempt to resell it. When a foreclosure sale does not usher in enough cashto pay off a loan, the lender (often a bank) takes possession of the property. Properties in need of significant upkeep often sell for far less than market value. When a lender falls back on their mortgage payments, the lender has two options: either a short sale of the property or a foreclosure auction. If nothing of these options works, the lender can foreclose and take possession of the property. Lenders can be conventional financial institutions, alternative lenders, government agencies, or even government-sponsored enterprises like Fannie Mae and Freddie Mac. The lender may try to sell the REO property without using a real estate agent. In such a circumstance, banks frequently publish online listings of their real estate owned (REO) properties. If a bank has REO properties, its loan officers may inform clients who are in the market for a new house that the bank has such properties available. Lenders typically have a dedicated REO expert who oversees the management of REO properties. They are responsible for a variety of tasks, such as:

·         Promotion of the real estate
·         Evaluating all potential deals
·         Maintaining an updated report on the financial institution’s property holdings
·         Seeking out actions

To ensure that homes are secure and winterized or vacated, the REO expert coordinates closely with the lender’s in-house or contracted property manager. These responsibilities are taken on by the REO expert in order to facilitate the bank’s speedy and orderly sale of its properties.

When a lendor haltsc making payments on a loan, the lender can legally seize the collateral (the home) and resell it to repay the debt. Default occurs when a borrower fails to make at least one monthly payment on time or otherwise observes the terms of the mortgage agreement.

A mortgage or deed of trust gives the lender the ability to foreclose on a property if the lendor forgets to make the required payments or otherwise abide by the conditions of the mortgage. Foreclosure typically occurs once a borrower fails on, or skips, at least one mortgage payment. However, this timeline varies by state. The lender follows up by sending a missed payment notification to let the borrower know that the payment for the previous month was not received.

After two missed payments, the lender will issue a demand notice to the borrower. This is more serious than a notice of missing payments, but the lender may still be ready to work with the borrower to make up the arrears.