‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.

You can’t understand Bulk REO Investments without understanding the process of foreclosure.

As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. After a certain period, the lender will then formally begin foreclosure proceedings. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.

The defaulted property is ultimately auctioned, thus completing the foreclosure process. Ownership of the property is returned to the lender if the property is not sold at auction. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.

Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.

There is huge profit potential in these REO packages for qualified real estate investors. One of the best ways to take advantage of Bulk REO Investing opportunities is to partner with a well-regarded source of funding. Some sources of funding for these transactions are: personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Bushemi of Dandrew Capital Partners, a New-York based hedge fund.

With the commercial real estate market about to go into a crisis that may actually even be worse than the one experienced by the housing sector, it is easy to figure out the reasons why the bank regulators have urged the lenders to enhance their efforts in finding ways to approve a commercial mortgage modification for their property owners on the brink of foreclosure.  The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and other financial regulators are worried that the stability of the financial institutions could easily crumble with the onset of the upcoming wave of defaults by commercial property borrowers.  The property owners are experiencing difficult times as a result of the reduction in their cash flows, the decline in the values of their properties, and absorption periods for rental and sales that are too long.

The financial regulators are also aware that a large percentage of the distressed commercial borrowers are still capable of repaying the mortgage and that they are just unable to do so at the moment because of the economic situation.  Hence, if both parties could just reach a decision for a mutually beneficial commercial mortgage modification, there is a strong chance that both will feel the positive effects in the future.

According to the bank regulators, there are different types of commercial mortgage modification deals, such as the offer of additional credit, the extension of the term of the mortgage, adjustments to the payment terms, and the renewal of some of the provisions.  The regulators also pointed out that if the loan workout will bring down the classification of the mortgage, the bank examiners will not regard this as a black mark against the financial institution if the bank had followed the applicable standards in assessing the risks that would be inherent in the restructuring of the loan.

The bank regulators are concerned that if an agreement for a commercial mortgage modification could not be reached, then a foreclosure of the commercial property would be imminent and this could have detrimental effects on the bank, the borrower and the economy.  Naturally, the borrower will suffer the consequences of losing an income-producing asset and this will also have unwanted repercussions on the economy.  The lender will also be negatively affected because it will just be stuck with an asset that is almost impossible to sell in a situation where the market is experiencing a glut in repossessed properties, aside from incurring the hefty costs of pursuing the foreclosure proceedings.

As for the property owner, it would be advisable to hire a loss mitigation expert to make sure that the arguments for a commercial mortgage modification are effectively provided.  This consultant will often perform a forensic loan audit that is designed to search for violations committed by the lender against laws and regulations that have been put in place by the government to protect the rights of borrowers.  Violators of these laws and regulations face severe penalties, thus, offering the property owner with a potent tool for convincing the lender to approve an application for debt restructuring.

For further information visit http://commercial-modification.com

The lender may allow negotiations for a loan workout only after a commercial loan review has been conducted to assess the ability of the business or individual to come up with the installments in the event that they are adjusted.  This particular review will examine various data with regards to the borrower, such as the payment history, the business cash flow, and whether there are any guarantors.  This review is one of the factors that the lender will consider when deciding whether to approve the loan workout or not.  Basically, what this means is that there is no sense in wasting time negotiating and then approving the adjustments if the borrower does not have the capacity to keep up with the payments.

Meanwhile, a commercial loan review has a vital and different purpose for the borrower.  Usually, loss mitigation professionals and experts are hired by the property owner to scrutinize the original loan agreement to check if there are any indications that some laws and regulations had been violated.  During the boom years when commercial loans were being approved in large quantities, many lenders had taken some shortcuts and had neglected to comply with laws that were established to protect borrowers from lender abuse.  If such violations are found in the contracts, the banks would not be able to implement any of the provisions that are contained therein, including foreclosure.  Thus, this is a vital negotiating tool for the borrower that could facilitate the approval of the application.

A commercial loan review may also be helpful when foreclosure proceedings have already been started.  If any violation is found in the original agreement, the court may order that the foreclosure process be stopped until such time that a decision has been rendered on the allegations.  The property owner may even halt mortgage payments although it is advisable to set aside these payments and let them accumulate in a separate account, just in case the court rules in favor of the lender.

Thus, a commercial loan review is essential for both lender and borrower although they have different purposes.  For the lender, it is a tool for evaluating the creditworthiness of the borrower but for the borrower, it is a negotiating tool in the event that violations are discovered in the original loan contract.

For further information visit http://commercial-modification.com

The term real estate investing likely brings a number of things to mind. You likely leap to real estate investing as real estate portfolios and real estate retirement plans, and then you may expand to thinking of short sales, bulk reo investing or virtual real estate investing. You likely also are wondering how these things factor into real estate investors’ roles in the current economy.

You will need to know a lot about real estate investing. The best way to optimize your real estate investing education is to know the basics ahead of time. No matter whether you are interested in short sales, bulk reo sales, virtual real estate or just enhancing your knowledge as a real estate investor, knowing some real estate investing basics will help you succeed. Here are three real estate investing basics that even some experts do not really know:

1. Real estate investing education always yields positive. Every real estate deal has the potential to create thousands of dollars in potential wealth. The knowledge of how to get that wealth is the key to your success. When you know about real estate your odds of success increase with each real estate deal. Small investments yield big results when you invest in learning and then implement what you learn.

2. Real estate investing success is possible in any economy. Lots of people believe that real estate success is only possible in a booming economy. Actually a poor economy is not a bad economy for real estate investors. You will likely find properties that you can buy at deep discounts. You might also find deals that simply would not exist in a booming economy. In fact, real estate investing can turn the tide for a poor economy. Short sales, bulk reo sales and virtual real estate all can thrive when the economy is not. You will be able to save yourself and others from serious financial difficulties if you know how to do these deals.

3. You do not need lots of your own cash to be a successful real estate investor. You can succeed in the real estate investing arena no matter how much money you are working with. There are lots of types of deals that you can perform with the money of other people. If you appear to be a solid investment you may be able to use a private lender’s money. A good investment will know as much as they can about real estate investing. This will help you show people that you are a good investment if they have the money to help you with real estate investing but they do not know how to use it.

Real estate investing is a good way to generate a great deal of wealth. You will have the ability to create income in any economy. Using knowledge of real estate investing, short sales, bulk reo sales and virtual real estate you will be able to create success for yourself. Real estate investing basic knowledge will help you succeed as a real estate investor.

   (Publisher’s note: This article originally published on GoArticles.com and republished here with permission.)  

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