source:
  type: regulation
  id: hud-4000-1-programs-and-products-hud-real-estate-owned-purchasing
  authority: HUD Handbook 4000.1 — Programs and Products - HUD Real Estate Owned Purchasing (09/20/2021)
  description: "HUD Handbook 4000.1 section \"Programs and Products - HUD Real Estate Owned Purchasing\"\
    . Gap-fill (verbatim, title-diff). \n"
obligations:
- id: hud-4000-1-programs-and-products-hud-real-estate-owned-purchasing-full
  canonical_id: hud-4000-1-programs-and-products-hud-real-estate-owned-purchasing-full
  section: HUD Handbook 4000.1
  description: "Programs and Products - HUD Real Estate Owned Purchasing: o. HUD Real Estate Owned Purchasing\
    \ (09/20/2021) \n(A) HUD REO Property \nA HUD Real Estate Owned (REO) Property, also known as a HUD\
    \ Home or a HUDowned home, refers to a one- to four-unit residential Property acquired by HUD as a\
    \ \nresult of a foreclosure or other means of acquisition on an FHA-insure…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - hud
  - 4000-1
  - curated
  primary_source:
    tier: 1
    authority: HUD Handbook 4000.1 — Programs and Products - HUD Real Estate Owned Purchasing (09/20/2021)
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: "o. HUD Real Estate Owned Purchasing (09/20/2021) \n(A) HUD REO Property \nA HUD\
      \ Real Estate Owned (REO) Property, also known as a HUD Home or a HUDowned home, refers to a one-\
      \ to four-unit residential Property acquired by HUD as a \nresult of a foreclosure or other means\
      \ of acquisition on an FHA-insured Mortgage, \nwhereby the Secretary of HUD becomes the property\
      \ owner and offers it for sale to \nrecover the mortgage insurance claim that HUD paid to the Mortgagee.\
      \ \n(B) Insured HUD REO Property Purchase \nAn Insured HUD REO Property Purchase refers to the purchase\
      \ of a HUD REO \nProperty by a Borrower with a new FHA-insured Mortgage. \n(C) Insured HUD REO Property\
      \ Purchase Programs \n(1) Section 203(b) \nThe HUD REO Property meets HUD’s Minimum Property Requirements\
      \ (MPR) \nin its as-is condition with no repairs, alterations, or inspections required. \n(2) Section\
      \ 203(b) with Repair Escrow \nThe HUD REO Property does not meet HUD’s MPR in its as-is condition,\
      \ but if \nrepairs of no more than $10,000 are completed, the HUD REO Property would \nmeet HUD’s\
      \ MPR. An escrow account to complete the repairs necessary to meet \nMPR after closing is required.\
      \ \n(3) Section 203(k) \nThe HUD REO Property does not qualify for Section 203(b) or Section 203(b)\
      \ \nwith Repair Escrow, and is eligible for FHA-insured financing only under Section \n203(k). \n\
      (D) Special Sales Incentives \n(1) Good Neighbor Next Door \nThe Good Neighbor Next Door (GNND)\
      \ sales incentive permits an OwnerOccupant Borrower who is a full-time law enforcement officer,\
      \ teacher, \nfirefighter, or emergency medical technician who meets HUD requirements to \npurchase\
      \ a specifically designated HUD REO Property located in a HUDdesignated Revitalization Area with\
      \ FHA-insured financing at a 50 percent \n\n \ndiscount from the purchase price. When using FHA-insured\
      \ financing, the \nBorrower may purchase the HUD REO Property with a minimum downpayment \nof $100.\
      \ In addition, the Borrower may include in the mortgage amount \ncustomary and reasonable closing\
      \ costs. \nGNND purchases may be processed as Section 203(b), Section 203(b) with \nRepair Escrow,\
      \ or Section 203(k). \n(2) $100 Down \nThe $100 Down sales incentive permits a Borrower to purchase\
      \ a HUD REO \nProperty with FHA-insured financing with a minimum downpayment of $100. \n$100 Down\
      \ purchases may be processed as Section 203(b), Section 203(b) with \nRepair Escrow, or Section\
      \ 203(k). \nii. Sales Contract \nThe Mortgagee must obtain form HUD-9548, Sales Contract Property\
      \ Disposition \nProgram, and any applicable addenda, which will establish the purchase price, price\
      \ \ndiscount, eligibility for GNND and eligibility for $100 Down, and meet the \nrequirements for\
      \ the Sales Contract. \n(B) Contract Sales Terms \nLine 4 of the sales contract will specify the\
      \ Insured HUD REO Property Purchase \nProgram under which the Borrower is applying, the downpayment,\
      \ and the mortgage \nRegardless of the Insured HUD REO Property Purchase Program entered on Line\
      \ 4 of \nform HUD-9548, the Mortgagee must determine the eligibility of the Property, the \neligibility\
      \ of the Borrower, and the specific Insured HUD REO Property Purchase \nProgram that must be used\
      \ to finance the purchase. \n(C) Good Neighbor Next Door \nWhere the Borrower is approved for the\
      \ GNND sales incentive, Line 8 will specify \nthe discount that will be applied to the purchase\
      \ price on Line 3. The amount of the \ncash downpayment specified on Line 4 will be $100. \n(D)\
      \ Eligible Nonprofit or State or Local Government Agency Borrower \nUnder certain circumstances,\
      \ eligible nonprofit or state and local government agency \nBorrowers may purchase Properties at\
      \ a discount from the stated listing price. Line 8 \nwill specify the discount that will be applied\
      \ to the purchase price on Line 3. \n\n \n(E) $100 Down \nWhere the Borrower has been approved for\
      \ the $100 Down sales incentive, the \namount of the cash downpayment specified on Line 4 will be\
      \ $100. \n(F) Closing Costs and Sales Commissions Paid by HUD \nThe amount on Line 5 specifies the\
      \ amount of closing costs that HUD will pay on \nbehalf of the Borrower. The amounts on Line 6a\
      \ and 6b represent the sales \ncommissions HUD will pay to the selling and listing broker. \nContributions\
      \ by HUD toward the Borrower’s closing costs are not defined as \nInterested Party Contributions\
      \ (TOTAL or Manual) or Inducements to Purchase \n(TOTAL or Manual). \niii. Ordering Case Numbers\
      \ \n(A) Section 203(b) and Section 203(b) with Repair Escrow \nMortgagees must order case numbers\
      \ for Insured HUD REO Property Purchases in \naccordance with Ordering Case Numbers. \nMortgagees\
      \ must select “Real Estate Owned w/Appraisal” for Processing Type and \nenter the case number of\
      \ the HUD REO Property in the Prior Case Number field. The \nHUD REO Property case number can be\
      \ found on the top right-hand corner of form \nHUD-9548. \n(B) Section 203(k) \nMortgagees must\
      \ order case numbers for Insured HUD REO Property Purchases in \naccordance with Case Number Assignment\
      \ Data Entry Requirements. \nMortgagees must select “Real Estate Owned w/Appraisal” for Processing\
      \ Type and \nenter the case number of the HUD REO Property in the Prior Case Number field. The \n\
      HUD REO Property case number can be found on the top right-hand corner of form \nHUD-9548. \niv.\
      \ Appraisals \n(A) Ordering Appraisals \n(1) Section 203(b) and Section 203(b) with Repair Escrow\
      \ \nMortgagees must order appraisals in accordance with the requirements of \nOrdering Appraisals.\
      \ \n\n \n(2) Section 203(k) \nMortgagees must order appraisals in accordance with the requirements\
      \ of \nOrdering Appraisals and Appraisals for Standard 203(k) and Limited 203(k). \n(B) Appraisal\
      \ Review and Property Acceptability \nThe Mortgagee must review the appraisal and property conditions\
      \ in accordance with \nthe requirements of Underwriting the Property. \nv. Occupancy Types \n(A)\
      \ Principal Residence \nAn Owner-Occupant Borrower may purchase HUD REO Properties using Section\
      \ \n203(b), Section 203(b) with Repair Escrow, and Section 203(k). \n(B) Investment Property \n\
      (1) Eligible Nonprofit or State or Local Government Agency Borrower \nAn eligible nonprofit or state\
      \ or local government agency Borrower may purchase \nHUD REO Properties using Section 203(b), Section\
      \ 203(b) with Repair Escrow, \nand Section 203(k). \n(2) Investor Buyer \nA Borrower may purchase\
      \ HUD REO Properties as Investment Properties using \nSection 203(b) or Section 203(b) with Repair\
      \ Escrow. These transactions must be \nscored through TOTAL Scorecard and then manually underwritten.\
      \ The \nMortgagee must downgrade and manually underwrite any Mortgage that received \nan Accept\
      \ recommendation through TOTAL. \nvi. Maximum Mortgage Amounts \n(A) Section 203(b) \nMortgagees\
      \ must calculate the maximum mortgage amounts in accordance with the \nrequirements of Calculating\
      \ Maximum Mortgage Amounts for Purchases, using the \napplicable Loan-To-Value ratio (LTV) from\
      \ this section, subject to LTV Limitations \nBased on Borrower’s Credit Score. \n(1) Owner-Occupant\
      \ Borrower \nThe maximum LTV is 96.5 percent. \n\n \n(2) Eligible Nonprofit or State or Local Government\
      \ Agency Borrower \nThe maximum LTV is 96.5 percent. \nWhere the eligible nonprofit or state or\
      \ local government agency Borrower \npurchases the HUD REO Property at a discount, Mortgagees must\
      \ calculate the \ndiscounted purchase price in accordance with the requirements for calculating\
      \ the \ndiscounted purchase price for GNND transactions. The discounted purchase price \nmust be\
      \ used when determining the Adjusted Value. \n(3) Investor Buyer \nThe maximum LTV is 75.0 percent.\
      \ \n(B) Section 203(b) with Repair Escrow \nMortgagees must initially calculate the mortgage amount\
      \ in accordance with the \nrequirements for Section 203(b) above. Mortgagees must add to the amount\
      \ resulting \nfrom that calculation the amount of an escrow account for the completion of repairs\
      \ \nafter closing. \nThe maximum escrow amount must be based on the sum of the repairs required\
      \ to \nmeet the intent of HUD’s MPR, plus a 10 percent contingency. The total escrow \namount, including\
      \ the 10 percent contingency, must not exceed $11,000. \n(C) Good Neighbor Next Door \n(1) Discounted\
      \ Purchase Price \nMortgagees must calculate the discounted purchase price and use that amount as\
      \ \nthe purchase price in determining the Adjusted Value for a 203(b) transaction or \nthe Adjusted\
      \ As-Is Value for a 203(k) transaction. \nThe discounted purchase price is calculated by reducing\
      \ the contract sales price \non Line 3 of form HUD-9548 by the discount percentage on Line 8 of\
      \ form HUD9548. To that amount the Mortgagee must add: \n• sales commissions from Line 6 of form\
      \ HUD-9548; and \n• any Borrower-paid closing costs (including prepaid items). \n(2) Section 203(b)\
      \ \nfrom the Adjusted Value. \n\n \n(3) Section 203(b) with Repair Escrow \nfrom the sum of the\
      \ Adjusted Value plus 110 percent of the estimated cost of \nrepairs, not to exceed $11,000. \n\
      (D) $100 Down \n(1) Section 203(b) \nfrom the Adjusted Value. \n(2) Section 203(b) with Repair Escrow\
      \ \nfrom the sum of the Adjusted Value plus 110 percent of the estimated cost of \nrepairs, not\
      \ to exceed $11,000. \n(E) Section 203(k) \n(1) Owner-Occupant Borrower \nMortgagees must calculate\
      \ the maximum mortgage amount in accordance with \nthe requirements of Section 203(k) Maximum Mortgage\
      \ Amount for Purchases. \n(2) Eligible Nonprofit and State and Local Government Agency Borrower\
      \ \nMortgagees must calculate the maximum mortgage amount in accordance with \nthe requirements\
      \ of Section 203(k) Maximum Mortgage Amount for Purchases. \nWhere the eligible nonprofit or state\
      \ or local government agency Borrower \npurchases the HUD REO Property at a discount, Mortgagees\
      \ must calculate the \ndiscounted purchase price in accordance with the requirements for calculating\
      \ the \ndiscounted purchase price for GNND transactions. The discounted purchase price \nmust be\
      \ used when determining the Adjusted As-Is Value. \n(3) GNND and $100 Down \nThe maximum mortgage\
      \ amount that FHA will insure on a GNND 203(k) \npurchase is the lesser of: \n• the Adjusted As-is\
      \ Value, plus: \no Financeable Repair and Improvement Costs, for Standard 203(k) or \no Financeable\
      \ Mortgage Fees, for Standard 203(k) or Limited 203(k); \no Financeable Contingency Reserves for\
      \ Standard 203(k) or Limited \n\n \no other Borrower-paid closing costs, including prepaid items;\
      \ and \no Financeable Mortgage Payment Reserves, for Standard 203(k) only; \no minus $100; or \n\
      • 110 percent of the After Improved Value (100 percent for condominiums), \nminus $100; or \n• the\
      \ Nationwide Mortgage Limits. \nvii. Additional Section 203(b) with Repair Escrow Requirements \n\
      (A) FHA Connection Insuring Application \nThe Mortgagee must check “Yes” in the Escrow Data field.\
      \ The Mortgagee must \nenter the amount of the escrow, including the contingency, in the HUD REO\
      \ Repair \nAmount field. \nviii. Additional GNND Requirements for FHAC Insuring Application \n(A)\
      \ Repair Escrow \nIf insured under Section 203(b) with Repair Escrow, the Mortgagee must check \n\
      “Yes” in the Escrow Data field. The Mortgagee must enter the amount of the escrow, \nincluding the\
      \ contingency, in the HUD REO Repair Amount field. \n(C) Sales Price \nMortgagees must enter the\
      \ discounted purchase price. \n(D) Secondary Financing \nMortgagees must complete information regarding\
      \ secondary financing by entering: \n• “Yes” in the Secondary Financing field; \n• the amount of\
      \ the discount by which the sales price was reduced in the \nAmount field; \n• “Federal Government”\
      \ in the Source of Funds field; and \n• “HUD GNND” in the Source Name field. \n(E) $100 Down \n\
      In the $100 REO Down Payment Program field, Mortgagees must enter “Yes.” \n\n \nix. Additional $100\
      \ Down Requirements for FHAC Insuring Application \nIn the $100 REO Down Payment Program field,\
      \ Mortgagees must enter “Yes.”"
    drafter_attestation: Verbatim section from snapshot 8c03836f77f317e1; boundary human-curated + substring-verified
      (2026-07-23).
  judgment: false
