Government Foreclosures

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Government Foreclosures

Government foreclosures offer great buying opportunities. The most well known are:HUD – Housing and Urban Development, Fannie Mae – Federal National Mortgage Association FNMA, Freddie Mac – Federal Home Loan Mortgage Corporation FHLMC, VA – Veteran’s Administration Department of Veterans Affairs, and USDA – United States Department of Agriculture.

 

HUD – United States Department of Housing and Urban Development

HUD Government Foreclosure
HUD Government Foreclosure

HUD is affiliated with the FHA – Federal Housing Administration.

The FHA, in that it is a federal agency, insures home loans for lenders to protect against default, in order to make it easier for lenders to make loans, buyers to secure loans, and, as a result, makes it easier for home buyers to purchase available homes, including government foreclosures.

FHA loans normally have lower down payments, usually 3.5% of the purchase price of the home, and also allow up to 3% of the purchase price of the home to be used for the buyer’s closing costs.  These features benefit you by keeping the buyer’s out of pocket expenses needed for the home buying process low.

FHA also has 2 loans that allow for repairs to their properties.  The 203k, and the 203b.

When a mortgage that is insured by FHA is in default, the mortgage holder(lender) forecloses on the home, it then sells the home back to the FHA, who then turns it over to HUD to be put on the market, and sold.

A HUD home is a 1 to 4 unit residential property.

HUD also has homes available through their Special Programs, such as the Good Neighbor Next Door Program,  Nonprofits Program, and their $1 Homes Government Sales Program.

HUD also allows incentives, such as $100 down payments, at different times in certain parts of the country.

In the case of HUD homes, you need a HUD approved broker, or HUD approved agent. Some realtors are HUD approved, some are not.

If you are interested in buying a HUD home, which you should be, make sure you check to see that the realtor you want to use is HUD approved before you hire them.

Like most sellers, HUD pays the Realtors fees, so by hiring a HUD approved broker/real estate agent,  you are securing invaluable services for FREE. Of course, one would have to be foolish to not take advantage of this.

You can find a HUD approved broker in your area by going to the HUD website, hudhomestore, and in the top menu, click on Find a Broker. Fill in your local info, and it will list the HUD approved brokers in your area.

Keep in mind, that by hiring a HUD approved broker, you are not limiting yourself to only HUD homes. These brokers/agents can also find, and help you buy any other types of homes on the market.

Find out what HUD homes are available in your area by going here.

Learn more about the HUD buying process here.

Federal National Mortgage Association, also known as Fannie Mae. 

Front-view-of-capitol-building-on-sunny-day
Government foreclosures offer great opportunities, such as FNMA – Fannie Mae.

We covered how to buy HUD foreclosures on the main page of this site. Here we will cover how to buy other government foreclosures so you can live well.

Fannie Mae’s purpose is to provide dependable, across the board access to mortgage credit that is affordable throughout the U.S. perpetually so folks can rent, buy, or refinance homes.

They have an important part in the nation’s housing finance system – to give affordability, liquidity,  and stability to the mortgage market.

They ensure liquid access to money at fair rates to the many banks, mortgage businesses, and other lenders that provide loans to finance housing.

Fannie Mae backs lenders, and thus assists buyers in purchasing homes. If these buyers default on their home purchases, Fannie Mae takes back the property, and then lists it through Realtors, who, in turn list the homes on the market  for sale.

Fannie Mae’s website is called HomePath.  This site will provide you with much more in depth information regarding the Fannie Mae home buying process, and it lists all of the available properties that Fannie Mae offers for sale.

Although, Fannie Mae may do some work on the home after it takes it back through foreclosure, it is an AS-IS property.  However, it may be possible to negotiate repair amounts needed along with your offer.

Once you have a good cash reserve,  a preapproval letter or a proof of funds in hand, and a Realtor lined up, you can begin the process of finding a Fannie Mae home.  The HomePath website lists what Fannie Mae homes are available in your area.

Once you have found a home or homes you are interested in, contact your Realtor, and let them know that you would like to see these homes in person.

Your Realtor does not need a special designation in order to sell Fannie Mae properties. All that is needed, is for the Realtor to register with FNMA on the HomePath website prior to submitting an offer for a client.

Stacks of cash
Be sure to have cash reserves before trying to buy government foreclosures.

Fannie Mae has a First Look Period on their homes. This allows owner/occupants 20 days from when the home is first listed, to offer on the home. After the initial 20 day First Look Period, the home is open to all buyers, including investors.

An owner/occupant must take occupancy with 60 days of closing, and live in the home for at least one year.

If, and when you find a Fannie Mae home that you would like to make an offer on, just inform your Realtor. They will, in turn, provide you with the needed contracts to sign, and then place the offer for you online.  These contracts include a sales contract, a FNMA addendum, and an Owner/Occupant certification.

Fannie Mae through HomePath has a first time home buyer program where if you complete the HomePath Ready Buyer course, they will pay up to 3% of the value of the home towards your closing costs.

After the offer is placed online by your Realtor, it will take approximately 2-3 business days to get a response.  This is not a bid process. It is a straight negotiation with FNMA, and the listing broker, much like a standard offer on a privately owned home.  The response to the offer could be an acceptance, a counter offer, or a rejection.

If and when your offer is accepted, you will need to provide a proof of funds, or a recent pre approval letter from a lender, along with a copy of the earnest money check.

Once Fannie Mae is in receipt of all needed documentation, and once everything is filled out correctly,  Fannie Mae will send your Realtor  the signed documents, and the green light will be given to move toward closing.

It is a good idea at this point to schedule an inspection on the home.  It is the buyer’s responsibility to schedule and pay for an inspection, with your Realtor’s assistance, of course.

It won’t be possible to renegotiate the accepted offer at this point, but it would be possible to back out of the transaction based on the negative findings of the inspection, should you decide to do so. You would need to provide proof to FNMA.   A copy of the inspection report would suffice in this case.

Typically, it will take 45 – 50 days from date of accepted contract to close on a FNMA home if the buyer is using financing. If the home buyer is paying with cash, it will shorten the duration to approximately 30 days. This time period can change based on possible issues with financing, title insurance, title search, and other issues.

Get up to 5 offers at LendingTree.com

Federal Home Loan Mortgage Corporation, also known as Freddie Mac.

Government-building-with-cement-steps-leading-to-8-cement-pillars-beneath-triangular-roof
FHLMC – Federal Home Loan Mortgage Association – aka Freddie Mac

 

Freddie Mac’s purpose, like Fannie Mae’s, is to provide dependable, across the board access to mortgage credit that is affordable throughout the U.S. perpetually so folks can rent, buy, or refinance homes.

They have an important part in the nation’s housing finance system – to give affordability, liquidity,  and stability to the mortgage market.

They ensure liquid access to money at fair rates to the many banks, mortgage businesses, and other lenders that provide loans to finance housing.

The process to buy a Freddie Mac foreclosure home is very similar to that of buying a Fannie Mae foreclosure home. The biggest difference is that the Freddie Mac website is called HomeSteps, instead of HomePath like the website of Fannie Mae.

Purchasers, through their agents of a Freddie Mac foreclosed home, must go through the HomeSteps website.

Your Realtor does not need a special designation in order to sell Freddie Mac properties. All that is needed, is for the Realtor to register with FHLMC on the HomeSteps website prior to submitting an offer for a client.

Please refer to the information above on Fannie Mae for the buying process, and to the Freddie Mac HomeSteps website for more in depth information.

Learn real estate investing with Barbara Corcoran from Shark Tank!

Veterans Administration – Department of Veterans Affairs – VA

Statues-of-3-American-soldiers-in-Viet-Nam
VA – Veteran’s Administration, Department of Veteran’s Affairs. Vietnam Memorial

The Department of Veterans Affairs, or more commonly known as the VA, guarantees a portion of a home loan to mortgage companies, banks, and other lenders for service members, and ex service members.

VA mortgages are guaranteed by the federal government, which makes it possible for lower rates to be offered by lenders that are VA approved.  These loans usually have slightly lower rates, and because veterans don’t have to pay PMI, private mortgage insurance, the monthly payment can be hundreds less than a conventional loan.

This makes it easier for lenders to provide loans, and for service members, and ex service members to qualify for loans, and to purchase homes. Unfortunately, sometimes these service members, and ex service members default on their loans.

When this happens, and the properties are foreclosed on, the VA buys back the properties, and then makes them available to the public for sale.

It is not necessary to be a veteran to purchase a VA foreclosure.  Anyone can buy a VA foreclosure, as long as they qualify for a loan through normal means.

VA homes are listed on the Multiple Listing Service, which all real estate agents and brokers have access to. You can also find VA foreclosure homes, and other government foreclosure properties listed at homesales.gov

VA foreclosures are not sold on an auction or a sealed bid basis. They are sold through realtors, in a straight negotiation basis, similar to how you would buy a privately owned home.

There are rules from the VA however, which must be adhered to, and your VA approved agent can direct you through this process.

If you don’t have or can’t find a VA approved agent, you can always utilize the listing agent on the VA foreclosed home listed for sale. Their contact information will be on the home’s detailed information.

If you are a veteran, or active duty service member, there are additional benefits that you may qualify for when buying a VA repo or VA foreclosed home.

However, no preference is given to a veteran buyer over a non veteran buyer for VA foreclosed homes for sale.  For more information ask your VA approved agent, or go to va.gov or homesales.gov

Government foreclosures of the USDA – United States Department of Agriculture

Tractor-on-farm-with-rainbow-in-distance
USDA – United States Department of Agriculture

 

USDA gives home ownership opportunities to rural U.S. citizens in the low to median income category by way of grant, loan, and guaranteed loan programs. These programs also provide funds to rural Americans to finance needed improvements in order to make their homes safe, sanitary, and decent.

When these home loans are in default, the USDA buys back the homes, and then through the use of a USDA Service Center Agent, lists the homes for sale to the public.  These homes are normally sold via auction that is handled by the USDA Service Center in the area that the home is located.

The USDA also provides a 100% loan for home buyers. This means that no down payment is required.  The home must be in a USDA approved area. Most of these areas are away from large metropolitan areas, but sometimes you can find USDA loan eligible properties within a reasonable distance to cities. To find out what areas are eligible, go to: usda.gov

For  more information on USDA, and their home programs, go to usda.gov

For a list of available USDA properties for sale in your area, go to  resales.usda.gov

 

FDIC – Federal Deposit Insurance Corporation
FDIC - Government Foreclosures
The FDIC sells different types of real estate including bank buildings.

The FDIC – Federal Deposit Insurance Corporation main purpose was and is to insure depositors against bank default.  The current insurance amount is up to $250,000.

The FDIC is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system.

They also examine and supervise financial institutions for safety, soundness, and consumer protection.  In addition to, making large and complex financial institutions resolvable,  and by managing receiverships.

Real Estate and Property Sales

The FDIC also sells real estate retained from failing banks.  They sell single family homes, multi family homes, commercial real estate, developed and undeveloped land, and bank premises.   They also sell other assets from failed banks such as vehicles, furniture, fixtures, and equipment.

Properties are generally sold individually through listings with local real estate agents and/or brokers, who are hired by FDIC real estate contractors to assist in the marketing and disposition of properties on behalf of the FDIC. Occasionally, the FDIC conducts open “outcry” and online real estate auctions.

All properties are sold on an “as is, where is, with all faults” basis. The FDIC makes no guarantee, warranty, or representation, express or implied, as to the location, quality, kind, character, size, description, or fitness for any use or purpose, now or hereafter with regard to any of the properties listed.

For an inventory of currently available real estate available through the FDIC, go to: http://www.fdicrealestatelistings.com

 

Department of the Treasury – Internal Revenue Service -IRS
The IRS auctions off seized real estate.

The Internal Revenue Service – IRS has extensive powers to seize the property of a taxpayer who has failed, neglected, or refused to pay tax obligations once due. This legal seizure of a taxpayer’s assets or property for satisfaction of a tax debt by the IRS is known as a levy.

Once real property has been seized, the IRS then lists the property for sale through an auction process that is made known on it’s website. https://www.treasury.gov/auctions/irs/cat_Real7.htm

The caveat for purchasing property through the IRS is the 180 day redemption period.  If the rightful owner comes forward prior to the end of the 180 day redemption period, they can take back ownership by repaying what the winning bidder paid, plus 20% interest.

The website provides the date of the auction sale, location of sale, the Title offered, description of property, how property may be inspected, legal description, minimum bid, terms of payment, forms of payment, and an IRS contact person with contact information.

 

GNMA, or Ginnie Mae, Government National Mortgage Association. 
Ginnie Mae
Ginnie Mae doesn’t sell government foreclosures, but provides liquidity for the market.

The Government National Mortgage Association, also known as Ginnie Mae, was establised in the year 1968.  It was started to encourage ownership of homes in the United States. Ginnie Mae is a U.S. government corporation that is part of the U.S. Department of HUD, or Housing and Urban Development and is an important player in the government foreclosures arena.

Ginnie Mae’s purpose is to provide liquidity for mortgages insured by the federal  government.  This includes mortgages insured by the FHA, Federal Housing Administration, the RHA, Rural Housing Administration, and the VA, Veteran’s Administration.

It’s purpose also is to attract capital from investors for these kinds of loans into the marketplace so more loans can be issued by the providers of the loans.

Most of the Ginnie Mae securitized mortgages are guaranteed by FHA, which are usually mortgages for low income borrowers, and first time home buyers.

Ginnie Mae merely stands behind (insures) the due payment of principal as well as interest from issuers that have been approved, such as commercial banks, savings and loans, and mortgage lenders of worthy loans, like those that the RHA, and FHA have put into service.

Ginnie Mae is not publicly traded, unlike it’s relatives Fannie Mae, Freddie Mac, and Sallie Mae.   The advantage of investing in a Ginnie Mae security is that it is fully backed by GNMA, which is guaranteed by the full faith and credit of the government of the United States of America, as are U.S. Treasuries.

For more information on Ginnie Mae, GNMA, or government national mortgage association, go to: https://www.ginniemae.gov/

Government foreclosures provide you an excellent way to buy properties. There are many properties available to you, and often times you can get a lower interest rate, lower down payments, lower closing costs, and other benefits when buying government foreclosures.

Find a real estate agent that is HUD approved, and you will find one that is familiar with the workings of government foreclosures, which can provide you with a very beneficial home buying experience. Many bargains can be had, and a good Realtor can make the process seamless, and profitable for you.

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4 thoughts on “Government Foreclosures”

  1. Do you ever buy these government foreclosed homes with intent to turn them into rental properties that produce monthly income?

    Do they make great investment properties?

    Id feel like that would be the only reason I would want to buy foreclosures. Not so much to live in but to rent.

    1. Hi Jessie, thank you for your comments. I currently don’t, but I know many people that do. They do make great investment properties. You could certainly buy foreclosures, and turn them in to rental properties.

  2. Very informative article. This is great info for anyone wanting to buy a home for their own use or to restore and flip. I looked into this a number of years back. I wanted to buy and remodel foreclosed homes and then sell them. You often find these homes are abused when the owner(s) find themselves in the foreclosure process. This site would have been very helpful. Thanks for your work.

    Don

    1. Thanks Don for your comments. Yes, I have seen foreclosures that have been damaged severely by the people being foreclosed on. Normally though, foreclosures are not damaged.

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