The US Department of Housing and Urban Development (HUD) is the largest mortgage insurer in the world and it provides cover for billions of dollars worth of home loans and mortgages every year. However, a number of borrowers fail to make their monthly loan repayments and end up losing their homes as a result of HUD foreclosures.
HUD home loans are administered through the Federal Housing Administration (FHA), but the money is actually provided by private banks and mortgage institutions. If a homeowner with an FHA-insured mortgage defaults on repayments, it is the private lender who will begin foreclosure proceedings.
Unless the homeowner can pay off their debt or make other arrangements stop the foreclosure, HUD will take ownership of the property. Lenders are reimbursed from the FHA Insurance Fund and the homes are sold on through licensed real estate brokers to recover HUD's costs. Thousands of homes are forfeited in this way every year across the United States.
The main benefit of FHA-insured loans is that they allow buyers to purchase a home with a very low down-payment. Buyers can also include the costs of closing the sale and other fees as part of the mortgage. One consequence of this is that borrowers on the FHA scheme tend to be on lower incomes and are statistically more likely to default on their loan repayments.
While this is bad news for some homeowners, it provides a useful opportunity for investors and home-buyers. Homes obtained as a result of HUD foreclosures are non-performing assets and HUD aims to sell them as quickly as possible to recover the lost revenue. As a result, prices for HUD foreclosures tend to be lower than the prevailing market rate.
In addition, people purchasing HUD foreclosed homes can take advantage of FHA-insured home loans and special mortgages for the rehabilitation of run-down properties and energy efficient renovations.
Homeowners with FHA-insured loans may be able to escape foreclosure by obtaining a one-time, interest-free loan from the FHA Insurance Fund to bring their loan account up to date. However, the loan must be repaid once the first mortgage is paid off or the home is sold. See Relief Options with FHA Foreclosures for more information.
HUD can also provide a list of approved housing counseling agencies for homeowners who are facing foreclosure. Call tel 800 569-4287 for counselling agencies in your area.