Mortgage servicers typically employ the specified credit bid approach when the estimated market value of the property is less than the total debt owed. With no perceived equity in the property, the lender lowers the credit bid below the total debt owed, believing there is little chance of recouping that total debt.
But it turns out a transparent, competitive foreclosure marketplace can uncover home equity in the form of surplus funds for the borrower, even when it didn’t look like that was possible.