Over 50,000 Government Foreclosures Homes for Sale

As of this month, there are over 50,000 homes in government foreclosures available for sale, according to data from the Departments of Housing and Urban Development, Veterans Affairs and Agriculture.

Most of these properties became government foreclosures after government agencies, such as the HUD, VA and DA, foreclosed on properties that they backed or originated. In several cases, the federal government took over foreclosure properties from private mortgage lenders.

Since 2007, the HUD has taken over more than 110,000 foreclosed homes for sale and has spent around $12.2 billion paying mortgage lenders for home loans that it backed. It has recovered only around $5.5 billion of its payments by selling most of them, with about 38,000 foreclosed properties still available for sale.

The overall number of government foreclosures is much higher if distressed properties by Freddie Mac and Fannie Mae are included in the count.

Nevertheless, the total number of government foreclosures is only a small percentage of the overall number of foreclosure properties nationwide as tracked by RealtyTrac.

Even so, Mark Bologna, director for loan guaranty service at the VA, said foreclosure properties entail additional costs for the agency. He said that VA spends for the maintenance and security of the foreclosed properties and that he expects more government foreclosures in the next several months.

Government foreclosures have risen by around 40 percent at HUD while they have doubled at DA over the past 24 months. Agriculture Department spokesperson Jay Fletcher said the rising trend in DA foreclosed homes is alarming.

The city with the biggest concentration of government foreclosures homes is Detroit. In some of the city’s neighborhoods, there are about four or more HUD foreclosure homes in the same block, together with foreclosure properties owned by private mortgage lenders.

Both the HUD and VA are marketing their foreclosure houses more aggressively to save on holding costs, but oftentimes the savings are useless as they are losing due to falling home prices. Last year, for every dollar received as payment for a sold home, HUD made a 39-cent loss while VA made a 13-cent loss for every dollar received as payment for a VA home sale.

In response to concerns about the viability of federal home loan guarantees in light of losses on government foreclosures, both Apgar and Bologna said that the government agencies have been collecting higher fees for their guarantees. They also added that the agencies also faced similar levels of foreclosures in the 1980s.

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