--- title: How to handle REO? description: This article provides considerations and ideas for how handle a loan that was wiped out by a senior foreclosure and is now REO/Real Estate Owned. --- [Skip to content](https://help.themortgageoffice.com/knowledge/how-to-handle-reos/write-offs#main-content) [![TMO-LO~1](https://help.themortgageoffice.com/hs-fs/hubfs/TMO-LO~1.png?width=200&height=65&name=TMO-LO~1.png)](https://www.themortgageoffice.com/) - [Platform](https://www.themortgageoffice.com/products/) Show submenu for Platform - [Loan Servicing](https://www.themortgageoffice.com/products/loan-servicing-software/) - [Loan Origination](https://www.themortgageoffice.com/products/loan-origination-software/) - [Fund Management](https://www.themortgageoffice.com/products/fund-management-software/) - [Knowledge Hub](https://www.themortgageoffice.com/knowledge-hub/) Show submenu for Knowledge Hub - [Blog](https://www.themortgageoffice.com/blog/) - [Resources](https://www.themortgageoffice.com/resources/) - [Webinars](https://www.themortgageoffice.com/resources/?_resource_types=on-demand-webinars) - [Seminars](https://www.themortgageoffice.com/seminars/) - [FAQs](https://www.themortgageoffice.com/frequently-asked-questions/) - [Release Notes](https://help.themortgageoffice.com/knowledge/release-notes) Open main navigation Close main navigation - [Platform](https://www.themortgageoffice.com/products/) Show submenu for Platform - [Loan Servicing](https://www.themortgageoffice.com/products/loan-servicing-software/) - [Loan Origination](https://www.themortgageoffice.com/products/loan-origination-software/) - [Fund Management](https://www.themortgageoffice.com/products/fund-management-software/) - [Knowledge Hub](https://www.themortgageoffice.com/knowledge-hub/) Show submenu for Knowledge Hub - [Blog](https://www.themortgageoffice.com/blog/) - [Resources](https://www.themortgageoffice.com/resources/) - [Webinars](https://www.themortgageoffice.com/resources/?_resource_types=on-demand-webinars) - [Seminars](https://www.themortgageoffice.com/seminars/) - [FAQs](https://www.themortgageoffice.com/frequently-asked-questions/) - [Release Notes](https://help.themortgageoffice.com/knowledge/release-notes) - [Contact Support](https://help.themortgageoffice.com/knowledge/kb-tickets/new) [Contact Support](https://help.themortgageoffice.com/knowledge/kb-tickets/new?hsLang=en) How can we help you? - There are no suggestions because the search field is empty. 1. [Knowledge Base](https://help.themortgageoffice.com/knowledge?hsLang=en) 2. [Loan Servicing](https://help.themortgageoffice.com/knowledge/loan-servicing?hsLang=en) 3. [Loan Files](https://help.themortgageoffice.com/knowledge/loan-servicing?hsLang=en#loan-files) October 9, 2026 # How to handle REO? ## This article provides considerations and ideas for how handle a loan that was wiped out by a senior foreclosure and is now REO/Real Estate Owned. NOTE: The Mortgage Office® was **not** designed specifically to be an REO tracking system. These ideas are not necessarily recommendations but **might** be useful and interesting for the more creative users out there.  ### 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](https://help.themortgageoffice.com/knowledge/how-to-add-or-edit-detailed-information-in-terms-of-a-loan?hsLang=en) tab, then select the Categories hyperlink and ![square-check-solid](https://help.themortgageoffice.com/hs-fs/hubfs/Icons/square-check-solid.png?width=15&height=15&name=square-check-solid.png) 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**. TIP:  You do **not** want to use the original file to later book property management costs or record sale proceeds through it, as that would distort the actual loan history for the **original** borrower file. - 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 ![db](https://help.themortgageoffice.com/hs-fs/hubfs/TMO%20APP%20Icons/db.png?width=15&height=15&name=db.png) **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 ![db](https://help.themortgageoffice.com/hs-fs/hubfs/TMO%20APP%20Icons/db.png?width=15&height=15&name=db.png) **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**. NOTE: Because The Mortgage Office® is not an official REO tracking tool, the following steps are mere **suggestions**.  - 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](https://help.themortgageoffice.com/knowledge/how-to-add-or-edit-detailed-information-in-terms-of-a-loan?hsLang=en) tab, then select the Categories hyperlink and ![square-check-solid](https://help.themortgageoffice.com/hs-fs/hubfs/Icons/square-check-solid.png?width=15&height=15&name=square-check-solid.png) 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](https://help.themortgageoffice.com/knowledge/how-to-use-the-categories-window-lo?hsLang=en) 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. TIP: The loan file **must** have a Principal Balance, a Paid To date, and a Next Due date in order to **process** payments. - 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](https://help.themortgageoffice.com/knowledge/how-to-add-or-edit-detailed-information-in-terms-of-a-loan?hsLang=en) 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](https://help.themortgageoffice.com/knowledge/how-to-use-the-filters-option-in-user-preferences?hsLang=en) 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. TIP: Make sure year-end 1098's are issued **prior** to hiding loans. 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