Government Foreclosures Explained in Plain English
It's clear that government foreclosures and other government houses for sale are hidden gems of real estate that can deliver a buyer tremendous savings.
While the process for getting into government foreclosure homes is not particularly mysterious, it's just not well publicized. As a result, these low cost homes tend to get lost in the sea of traditional property listings.
Following is a closer look at the different types of government foreclosures: HUD Homes, VA Foreclosures, Fannie Mae Foreclosures, and Freddie Mac Foreclosures.
HUD boasts a large selection of government foreclosures, due in large part to the way HUD operates. HUD is the arm of the federal government that is responsible for increasing home ownership in the United States.They achieve that aim by working with the FHA (Federal Housing Administration) to insure mortgages that would otherwise not measure up to a lender’s traditional standards for credit worthiness or down-payment requirements. These higher risk loans ultimately produce a higher default rate that unfortunately results in more frequent foreclosure.
When these HUD homes are foreclosed on, HUD becomes the property owner and offers these cheap houses for sale to the general public. During the offer period, potential buyers place sealed offers, or bids, on the property. Bids must be submitted by a qualified HUD homes broker. When the offer period is complete, the bids are opened, and the highest reasonable bid is accepted.
VA foreclosures result when a mortgage backed by the VA Loan Guaranty Service, which allows a veteran or active duty service person to get terms on a loan they might not otherwise qualify for, goes into default. These government foreclosures are posted for sale to the public. Note while you need to be a veteran to get a VA loan, you don’t need to be a veteran to buy VA foreclosures. Offers on VA foreclosures are submitted by a buyer’s agent to the VA’s listing broker.
Fannie Mae Foreclosures
Fannie Mae foreclosures are homes that were once financed under conventional mortgages, and after an unresolved period of financial distress, sold to Fannie Mae ( Federal National Mortgage Association). Fannie Mae provides a number of resources to low to middle income families aimed at helping them purchase a home. If these homeowners cannot maintain their mortgage payments, the home is foreclosed on and sold to the general public to recover the amount of the original mortgage. Fannie Mae foreclosures are sold through local brokers who submit offers on these homes.
Freddie Mac Foreclosures
Freddie Mac is a public corporation started by congress in 1970 that provides credit guarantees to mortgage lenders and expands opportunities for home ownership. Like Fannie Mae, Freddie Mac repossesses homes due to loan defaults and is motivated to sell these foreclosures to the general public. And, like Fannie Mae, Freddie Mac may offer special financing and other buyer assistance programs to encourage sales of their foreclosures. The selling agent can provide details on any available programs. As with other government houses for sale, offers for Freddie Mac foreclosures need to be submitted through local qualified brokers.