Why Lenders Sell Bulk REO and Non-Performing Mortgage Notes

Bulk REO Video Training

When a property is not yielding income it has dire consequences for the lenders and the general economy as well.  A defaulted mortgage could greatly limit a bank’s borrowing ability by nearly 900%.  Let’s say the defaulted amount of the asset is just %100,000 – in that case the bank is blocked from borrowing up to $900,000 until the property is assumed by someone else.  Also, as the defaulted asset loses value the lenders must record the adjusted value, thereby taking a great financial hit.

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There aren’t many solutions for banks when it comes to easing the negative impact non-performing assets have on their accounts.  Lenders won’t foreclose unless all other options have been depleted.  High legal expenses are the beginning of this costly process that lenders face.  While the property is still REO (Real Estate Owned) it incurs the expense of considerable property management.  REO properties increase the chance for liability every minute they sit unoccupied, amplifying the risk that the asset will further nose dive.  When selling any property there are expenses – from marketing to transactions that accompany selling real estate.

An even bigger problem banks face is staffing.  If foreclosure appears to be the only option left, banks often don’t have the manpower to oversee and divest REO’s, especially bulk REO’s.  It has been almost 15 years since the last major crisis in lending took place and personnel have been robbed of REO experts at staggering levels.  On top of this, the United States has few in-house experts at any of the larger lending institutions who can handle bulk REO’s which need someone to manage them, secure them and sell them with minimal loss.

Without a doubt, today’s servicing agencies and mortgage companies seem to singlemindedly be in agreement to unload troubled loans as quickly as possible even if it means selling at a loss.

Once again, an excellent solution to this debacle appears to be effective Bulk REO Investing.

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