Government Foreclosures: Government REOs, Tax Foreclosures and Bankruptcy Homes

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Government Foreclosures
Government REOs Tax Foreclosures and Bankruptcy
Homes
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Government Foreclosures

• Most Government Foreclosures are homes that went
  into foreclosure after the homeowner defaulted on
  a government-backed loan. Government agencies
  usually buy these loans and sell the homes
  themselves as Real Estate Owned (REO) properties.
  Well be looking at five government entities that
  sell foreclosures
• The U.S. Department of Housing and Urban
  Development (HUD)
• The U.S. Department of Veterans Affairs (VA)
• The U.S. Department of Agriculture (USDA)
• The Internal Revenue Service (IRS)
• Bankruptcy Courts

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Fannie Mae and Freddie Mac
Though neither the Federal National Mortgage
Association (Fannie Mae) nor the Federal Home
Loan Mortgage Corporation (Freddie Mac) sell
foreclosed homes these Government-Sponsored
Enterprises (GSEs) play an important role in the
real estate market. Both Fannie and Freddie exist
to make sure theres an indefinite amount of
money to fund home loans by buying existing loans
and selling them to other lenders.
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FHA
The Federal Housing Administration (FHA) exists
to help more Americans achieve homeownership. As
such many lower income Americans can qualify for
FHA-backed home loans. However as with any other
type of loan the homeowner must pay this back
over time. If the homeowner falls behind on their
loan payments the home goes into foreclosure and
is usually taken over by HUD as an FHA
Foreclosure.
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HUD
The U.S. Department of Housing and Urban
Development usually sells homes purchased with
defaulted FHA-backed loans as REOs. These
HUD homes may be ideal for individuals who want
to purchase a home directly from the lender but
find banks intimidating.
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VA

• If a home purchased with a VA-backed loan such
  as the VA Vendee Financing Program goes into
  default it becomes property of the U.S.
  Department of Veterans Affairs (VA). Many VA
  foreclosures are well maintained and include many
  great benefits for potential homebuyers and
  investors such as
• No re-payment penalty
• Low interest payments
• Fewer purchasing costs

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VA
PLEASE NOTE VA loans are not just for veterans.
If you are purchasing a VA foreclosure you can
qualify for a VA-backed loan such as those
offered through the VA Vendee Financing Program
even if you are not a veteran.
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USDA
The main purpose of the U.S. Department of
Agriculture is to regulate farming and food
safety. However the USDA also provides Rural
Development home loans and homes backed with
these loans are usually repossessed by the USDA
when they go into default. USDA foreclosures may
be ideal for you if youre seeking farmland or
large family homes in a rural area.
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Tax Liens and Bankruptcies

• Not all homes sold as government foreclosures go
  into foreclosure because the homeowner defaulted
  on their home loan. The next fews will
  discuss homes that came to be government REOs
  through two different methods
• Tax Foreclosures
• Bankruptcy Foreclosures

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Tax Foreclosures

• If a homeowner fails to pay their taxes their
  home can be repossessed by the Internal Revenue
  Service (IRS) and sold as a tax lien
  foreclosure or tax deed foreclosure to pay off
  their debt to the government. Unpaid taxes that
  may result in a tax foreclosure include
• Federal taxes
• Income taxes
• Property taxes
• State taxes

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Tax Foreclosures
PLEASE NOTE Your state may practice tax lien
foreclosures over tax deed foreclosures or vice
versa and auctions can occur anywhere from once
per quarter to once per month. Consult your local
IRS office for more details.
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Tax Lien Foreclosure
In a Tax Lien Foreclosure the buyer initially
purchases a certificate equal to the amount the
homeowner owes on their back taxes. The homeowner
is given a specified amount of time to pay back
their liens. If the homeowner fails to do so the
tax lien certificate holder can request a tax
deed from the county. This gives the buyer
ownership of the property and all remaining
debts and liens from the previous homeowner are
cleared.
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Tax Deed Foreclosure
In a Tax Deed Foreclosure buyers are bidding on
the deed to the house starting at the amount owed
on the homeowners back taxes rather than buying
a tax lien certificate. Like in a tax lien
foreclosure the homebuyer will receive the home
cleared of all debts and liens.
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Bankruptcy Foreclosures
When a homeowner files for bankruptcy their
property may be among their liquidated assets. If
this is the case homebuyers can purchase these
homes as bankruptcy foreclosures.
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Bankruptcy Foreclosures
PLEASE NOTE Bankruptcy foreclosures are
different from most foreclosure sales in that the
sale of the home will be strictly governed by a
bankruptcy court and court-appointed trustees. Be
prepared to have to go through several court
proceedings if necessary.
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In Summary...

• Most government foreclosures are homes purchased
  with government-backed loans that went into
  default and are often repossessed by associated
  government agencies.
• Fannie Mae and Freddie Mac are GSEs that exist to
  make sure lenders dont run out of money to
  finance loans by buying and selling existing home
  loans.
• The FHA is a government agency where lower income
  Americans can obtain government-backed home
  loans.
• Homes financed with FHA loans that go into
  default often go into the possession of HUD.

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In Summary...

• The VA provides home loans to veterans that are
  repossessed if they go into default. If you are
  buying a VA foreclosure you may be eligible for a
  VA loan even if you are not a veteran.
• The USDA provides Rural Development home loans.
  USDA foreclosures can be ideal for large families
  that want to live in a rural farming area.
• Tax lien foreclosures allow potential homebuyers
  to purchase a tax lien certificate representing
  the homeowners unpaid taxes while tax deed
  foreclosures allow the homebuyer to purchase the
  tax deed directly.
• Bankruptcy foreclosures are overseen by local
  bankruptcy courts and court-appointed bankruptcy
  trustees.

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Want to learn more

• ForeclosureDatabank.com provides many articles on
  Government Foreclosures and other REO Properties.
• Want to know if your home loan still belongs to
  the same lender Research more about Fannie Mae
  and Freddie Mac first.
• Whether youre looking for an FHA foreclosure
  HUD home or VA repo home ForeclosureDatabank.com
  can help.
• Interested in a tax foreclosure Articles about
  tax lien foreclosures and tax deed foreclosures
  are at your disposal.
• Need to know more about bankruptcy foreclosure
  proceedings ForeclosureDatabank.com members have
  access to 24/7 customer service via e-mail.

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