Real Estate Owned (REO) Department
Defined. REO (Real Estate Owned) is real property property owned by a lender, which was acquired by the lender at a foreclosure auction. When a person borrows money from a bank to purchase a condominium, townhouse, or house, the property is pledged as collateral for the loan. A loan secured by real property is called a mortgage. If a buyer stops paying on his mortgage, he goes into default and the bank has the right to sell the property to recover the monies owed.
Asset Manager. When property goes to sale at a foreclosure auction, lenders set the opening bid at the amount of the outstanding loan. If there are no bidders on the property, the bank takes ownership for the amount of the unpaid loan. At that point the property goes to an asset manager in the bank's REO Department where it is managed until such time as the bank is able to resell the property.
Assessments. Once the lender takes ownership of the property, it is obligated to pay all assessments levied against the property by a homeowners association.