Commercial Real Estate Owned (REO) Property

Summary

This practice note provides an overview of commercial real property, known as real estate owned (REO) property, that a mortgage lender acquires and owns as a result of the lender's mortgage foreclosure or related settlement transaction with a defaulting borrower. This practice note discusses the mechanics of how a mortgage lender acquires commercial REO property as part of such a foreclosure or settlement, due diligence that the lender should perform before or immediately upon taking title to REO property, issues that the lender or its property manager faces in connection with managing REO property and its operations, and issues that arise when a lender later sells REO property. It also includes special guidance for banks that acquire and own commercial REO property through a mortgage foreclosure or settlement.