FHA Foreclosure Homes
If a homeowner has a mortgage insured by the Federal Housing Administration but fails to pay that mortgage, the lender can start foreclosure proceedings against the homeowner. This is a process to ultimately repossess the property. The lender will file a claim with the Federal Housing Administration and the agency will pay the lender for the money lost on the defaulted loan. Eventually, when the home is repossessed, the HUD will take ownership of the home.
At this stage of the process, the HUD will own a home and will have had to pay money to the lender to cover the bad loan on the property. The HUD is not prepared to hold real estate and must earn back the money lost on the defaulted loan. Therefore, the HUD will attempt to sell its foreclosure properties quickly. Usually, it does this by offering a good discount on its distressed houses.