Foreclosures

A home is foreclosed when the owner stops making payments for a number of months.  The financial institution takes the house back under the terms of the deed of trust.  The owner borrowed money using their house as collateral with the agreement that if you could not pay it back the lender could take the house back.

A lender will usually obtain a security interest from a borrower who pledges or mortgages an asset like a house to secure the loan. When  the borrower defaults on the mortgage the lender will repossess the property, When the lender decides it is going to foreclose on a property it issues a notice of trustee sale which starts the foreclosure process.  Once the notice has been issued the borrower has a 90 day redemption period where the borrower may repay the debt and keep the property

When the redemption period is over on the 91st day after the notice of trustee sale the home will go to the courthouse steps to be auctioned (Trustee sale auction).    At the courthouse steps on the specified dates a number of things happen.  Many of the proposed auction homes may be postponed; this may be due to a deal the lender has made with the borrower or maybe the borrower has the home in escrow to be sold.  The proposed homes may be taken back by the bank, most of the time the banks prefer to take the properties back and sell them as REO.  Of the remaining homes approx 4% will actually be sold at the courthouse auction.   Approximately 96% of the homes will either be postponed or taken back by the bank.

Want to bid on a Trustee sale auction?  Here is what you will need to do, show up with a $10,000 cashiers check.  You will not be able to bid without it.  The lender will set the starting bid price.  What happens if you win the bid?   Your $10,000 cashiers check will be used as down payment for the sale.  You are required to pay the remaining balance by 5 p.m. the next business day.  If you do not pay in full in the time frame given, you will lose your $10,000 deposit and may be barred from future auctions.

What happens to the ones not sold at the courthouse auction?  Depending on the type of mortgage used to secure the property many of them may be acquired by HUD, Fannie Mae, Freddie Mac or VA.  These agencies guarantee mortgages that were given to borrowers under the guidelines of the agency.  VA guarantees VA mortgages, Fannie Mae and Freddie Mac insure conventional mortgages and HUD insures FHA mortgages.  These homes will then be sold by the agency that has acquired or taken ownership of the home.   The rest of the homes will become REO  or bank owned homes. 

 

HUD Homes

A HUD Home is a home that had a FHA mortgage and was foreclosed on by the lending bank.  That bank then conveys the property to HUD through an insurance claim.  HUD then sells the home through a local real estate agent.  HUD is a government agency and their homes are sometimes referred to HUD Homes, HUD acquired homes or Governments homes.

HUD Homes tend to be very good values and are easy to purchase.  You need a real estate agent to purchase a HUD home so the first step in buying a HUD home is to find an agent that is registered with HUD and knows the HUD purchasing process.  All HUD Homes that are currently for sale are listed on HUD’s website. www.hudhomestore.com

 

Fannie Mae & Freddie Mac

Fannie Mae and Freddie Mac are similar to HUD but they are not Government agencies.   Both are mortgage insurance companies just like HUD but they back conventional mortgages rather than FHA.

You can find Fannie Mae homes on www.homepath.com and Freddie Mac homes on www.homesteps.com.  

 

VA Homes

A VA home is a home that had a VA mortgage and was foreclosed on by the lending bank.  That bank then conveys the property to the VA through an insurance claim.  The VA then sells the home through a local real estate agent.  The VA is a government agency.  They back mortgages lent to eligible service members and veterans.  See eligibility requirements here benefits.va.gov/homeloans/purchaseco_eligibility.asp.  You can find VA homes for sale on listings.vrmco.com.  

 

REO

REO stands for real estate owned, this is a term used by banks when they have foreclosed on a home and now own it.   Prior to foreclosing the bank does not own the home, the borrower owns the home the mortgage or Deed of Trust gives the bank the security to take the home away from the borrower if the payments are not made.  Once the foreclosure happens and the bank owns the home they will either convey the home to VA, HUD, Fannie Mae or Freddie Mac if it is an insured mortgage or they will sell the home  with the help of a local real estate agents like The McNab Team.