George Wolf
Sep 12,2008
In: reo homes

REO Process

By Reo process is meant the process of repossession of foreclosed units by lenders, mostly the banks. The foreclosure is a judicial process.

The Reo process is time, energy and money consuming. When a borrower defaults in payment of mortgage dues the lender issues a warning notice saying that if within a certain period the dues are not cleared the bank will foreclose. Foreclosure leaves the borrower without a house and with a bad credit report. This will make it difficult for the person to start life anew with new loans. The lender has also to notify the court and seek its permission to foreclose. A date is set for court auction if the court is satisfied with the allegations of the lender. When the auction fails to find a satisfactory purchaser then the bank repossesses the house and tries to sell it in the open market rubbing shoulders with other houses for sale.

The Reo process is so long a cumbersome that the banks are reluctant to proceed with it. The Reo process has put so much pressure on the courts that there is a huge backlog of work piling up. The present infrastructure of the banks do not allow for more speed in the work of Reo process. The complications related to the Reo process makes it impossible for the borrowers, who has reached the end of his or her finances to engage a lawyer to plead. Thus the Reo process, as it is today is a one-way traffic for the lenders. Of late the community and the government have woken up to the dangers of so many foreclosures. Free legal advice and help is being offered so that the borrowers have some say in the Reo process.

The REO process is being a big shake up by the courts that are now challenging the bonafides of the lenders to see whether they have the authorizing notes to pursue the case. So far the Reo process has been one sided and nobody ever questioned the point. But with mortgages having been parceled, sliced and sold to outside buyers this question has cropped up related to the entire Reo process. The servicers collect mortgage dues but do they have the right to foreclose? The Reo process is being now made more difficult for the lenders to push through with foreclosures without opposition.

With so many houses being repossessed leading to alarming social, economic and political ramifications the question has come up of a thorough overhauling of the anachronistic mortgage system with its heavy institutions that have been chugging along since the 1930’s.

Recently a new bill has been passed that also got the approval of a reluctant President. The purpose is to help millions of foreclosure victims. But the clauses are such that without the voluntary proactive approach by the lender loan modifications cannot be effected. So the key to opening the doors lies with the mortgage industry giants. Time alone will prove its effectiveness.