Bulk REO Video Training

The ill effects of non-performing assets are not just felt by the lenders but the entire economy is negatively impacted by them.  Defaulted mortgage loans mean that a lender might be hindered in its ability to borrow by around 900%.  For instance, if a loan of $100,000 is in default, the lender is forbidden from borrowing up to $900,000 until the property is dumped.  Also, as the defaulted asset loses value the lenders must record the adjusted value, thereby taking a great financial hit.

(A quick note from the editor:  For related information, check out Bulk REO Investing.)

There aren’t many solutions for banks when it comes to easing the negative impact non-performing assets have on their accounts.  Lenders will exhaust all other avenues before resorting to foreclosure.  These actions are pricey for lenders and start with exhorbitant legal expenses.  While the property is still REO (Real Estate Owned), it requires extensive property management.  There is a higher chance that vacant REO properties will suffer damage further plummeting in value.  There are also the expenses of selling any real estate holdings that include transaction expenses and marketing.

Staffing is yet another issue lenders face.  It matters little that a lender feels the only option is to foreclose if proper staffing can’t be put in place to manage and unload these REO properties.  The last time anyone saw a lending crisis of this magnitude was almost 15 years ago, and not since then have the valuable number of REO experts been lost at such perplexing numbers.  Also, the larger lenders in the United States are hard pressed to come up with current in-house experts who can manage bulk REO’s or provide the proper management or security for them while preparing to sell them without incurring too great a loss.

As quickly as humanly possible today’s lenders, bond managers and servicing agencies appear to be charting the same course: Get rid of those unstable loans even if it means selling at a loss.