How to handle REO?

Follow these steps to make REO changes:

• During foreclosure (FCL), the loan should be in a Foreclosure category and on Hold to prevent inappropriate transactions that might invalidate the FCL action.
  • Open the loan file you want to mark with the Foreclosure category.
    • Go to the loan Loan Term Details tab, then select the Categories hyperlink and  check the Foreclosure box.
• After FCL, generate a Demand for Payoff, print it and also attach it to the original loan file.
  • You may need these numbers later, as the Payoff Demand shows the balances as of the FCL date.

• You should then Write-off all of the balances on the original loan.
• With the loan open, click on Funding in the left-hand navigation panel.  
  • Click Add Funding and enter a negative amount in the Funding Amount box to reduce the Principal Balance. 
• Click Charges in the left-hand navigation panel. 
  • Click Adjustment to write-off the loan charges by entering the amount of each charge as a negative. 
• Click Terms in the left-hand navigation panel.
  • If there are any remaining balances (Late Charge balance, Current Balance, Unpaid Charges, etc.), use the pencil to the left of the box to write-off those balances by entering the amount of each remaining balance as a negative. 

• If you choose to use The Mortgage Office® to track the REO asset, you could setup a "new" loan to represent the REO.
  • When setting up this loan, enter the Borrower "Full Name" from the original loan as the street address of the new loan's property. 
  • Reestablish all of the account balances and the lender ownership for the new REO loan to the cost basis at FCL (or whatever balance you deem appropriate).
    • Ask your attorney or accountant if you're not sure what value to use.
  • Click Terms in the left-hand navigation panel.
    • Set the Note Rate to 0%. 
  • If the loan is owned (fully or partially) by a mortgage fund, make sure the ownership and the values are correct in the fund's evaluation, especially if you have our Mortgage Pool Servicing software.
  • Go to the loan Loan Term Details tab, then select the Categories hyperlink and  check the REO box.
    • You may have to create a new category named "REO" before it shows up in the Available categories list. Click here to learn more about categories. 
• To run rent payments through the REO loan file, you can do so through one of the following methods: 
  • Add at least a penny to the loan as the Principal Balance, if it does not already have a balance, so the account will allow payments to be processed.
    • In the Regular Payment section, set up an Other Payment (paid by the Borrower) payable to either a Lender or Vendor account for the amount of the "Rent". 
  • In the REO loan account, set the entire lease amount up as a Principal Balance and then enter the monthly rent payment amount in the P & I box, so as they make payments it pays down the lease amount in the Principal Balance. 
  • In either option above Payment Statements, Coupons, and Late Notices would work and be able to be generated correctly. 

• If you would like to “hide” loans from the loan grid, that have been Paid or Written-off, consider the following steps:
  
  • Go to the Loan Term Details tab, then select the Categories hyperlink and click new. 
  • Create a category for Paid/Closed Loans by year. For example: 
    • 2021 Prior Paid/Closed Loans
    • 2022 Prior Paid/Closed Loans 

• • Once the categories are created, go to the Filter Options and choose what categories to hide in the Loan Filter.
• Add the appropriate category to the loan during the loan pay-off or FCL to hide them.
  • By having loans in a category by year paid, you can place them in the category as you go along, you can run reports and send letters to them, and you can hide or un-hide by year.

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