Back to the glossary
Dation in payment
Dation in payment is the handover of the property to the bank to settle the outstanding mortgage debt and cancel the loan.
Detailed explanation
Through dation in payment, the debtor transfers ownership to the lender, which considers the debt extinguished, avoiding foreclosure and auction. The property passes to the bank, which often then markets it as an REO at a discount.
Practical example
An owner who cannot pay hands their home to the bank through dation in payment; months later, that home is put up for sale as an REO asset.
When it matters
Understanding dation in payment helps you grasp the origin of many bank assets and at what point in the process they reach the market.
At Arkos Investor
At Arkos Investor many of the REO assets we select come from dations in payment, already free of charges.