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Due Diligence at Foreclosure: What Do Lenders Need to Consider?

Good pre-foreclosure due diligence can help identify red flag issues with a property.

The increased frequency of foreclosures in today’s market is a reality that many lenders have to face head on. In addition to the headache of dealing with a failed loan, having to deal with the property itself and becoming an owner of that property can prove an even bigger headache (which is why performing thorough due diligence is so critical). In fact, often the due diligence a lender does at the pre-foreclosure stage is above and beyond what was done during the origination of the loan. Here are a few reasons why:

  • Environmental issues
  • Property condition issues
  • Unfinished construction
  • Erosion control

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