[JGo9]

Here is the scenario:

We have a loan that is set to start foreclosure proceedings. However, the borrower is going to put the property up for absolute auction. I’ve been asked if we could get a 3rd Part (not connected with the bank) to bid on the property at a certain price point. If they end up getting stuck with the property can we agree to purchase the property from them (at the same price) and move that property into OREO?

There is another party that has express interest in the property, but the fear is that they will wait till the bank purchases the property back and then try to get it at a discounted price.

Do you know of anything that addresses the ability of a bank to do this?

Thanks,

[jholzknecht]

Most states generally allow banks to hold real property received in satisfaction of debt or to acquire real property needed for business purposes, such as acquiring a branch location, but otherwise restrict banks from investing in real property.

It is not clear why the third party option is being considered, but acquiring the property from a third party rather than in direct satisfaction of the debt may disallow the property as OREO.

[Author]

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