. REO (Real Estate Owned) refers to bank-owned property acquired through foreclosure. 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, the loan goes into default and the bank has the right to sell the property to recover the monies owed.
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.
Once the lender takes ownership of the property, it is obligated to pay all assessments levied against the property by the association. As an owner, the bank also has the right to vote
in all association elections. The lender must give notice
to the association that it has acquired ownership of the property.
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