America’s foreclosure crisis still isn’t over, according to Attom Data Solutions Year-End 2016 U.S. Foreclosure Market Report released in January, 2017.  Despite there being a 64% drop in repossession filings (default notices, scheduled auctions, bank repossessions) since 2010, some 933,045 properties remained in foreclosure in 2016. One third of those foreclosures were “new” in 2016 while 2/3 of those  properties were lingering, or backlogged, from previous years.  States with the biggest foreclosure backlogs were New Jersey, Florida, New York, California and Illinois.

The FHA $100 Down Payment Program, created in 2010 and still operating today but only in certain states, was designed to incentivize potential buyers to purchase HUD owned homes (homes that were foreclosed on that originally used FHA insured financing) with a small down payment.  A $100 down payment is substantially less than the usual FHA financed down payment of 3.5%. To be eligible for this $100 Down Payment Program, potential buyers have to qualify for credit under regular FHA guidelines, work only with an HUD registered broker to help submit a bid for a property, have a pre-approval letter from an FHA lender, use FHA financing only to purchase an HUD property that was originally secured with FHA insured financing, and submit an earnest money deposit on the property of $1,000. in the form of a money order or certified bank check.

Originally, the purpose of this program was two-fold: to sell HUD foreclosed homes quickly and to get owner-occupants into these homes quickly.  Why?  The Department of Housing and Urban Development believes that people who own properties take better care of them than renters.  And, from a crime prevention standpoint, HUD does not want vacant homes to remain vacant indefinitely.

The process works like this…HUD reimburses the lender for the amount that was owed to the lender for the property and then takes ownership.  Once HUD has ownership, the department assigns an HUD Asset Manager in the district where the property is located.  The HUD Asset Manager secures the property and then assigns an HUD Field Manager who then prepares the property for sale.  The Field Manager lists the property with a local HUD approved registered broker and then the property is available for sale.

True, there are multiple variables in this process that could backfire however, this FHA $100 Down Payment Program has and continues to serve its twofold purpose…potential homeowners looking for “bargain” or small down payments to buy homes they otherwise could not afford to buy are doing so, and large numbers of formerly vacant HUD homes are occupied.