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Bank and FHA Foreclosures for Sale Spawn a New Industry

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By : John Cutts    99 or more times read
Most of the time, residential properties end up as bank and FHA foreclosures for sale because the homeowner is unable to pay his mortgage, thereby giving the bank or lender the right to foreclose on his property. However, a new form of business, wherein hedge funds and banks take over the unpaid property taxes of homeowners, has emerged.

According to reports, some foreclosures in Pompano Beach and in some other areas of Florida are conduced by financial institutions who own the tax liens of property owners who have found themselves unable to pay for their property taxes. The process starts with financial institutions collecting homeowners' tax debts which give them the opportunity to add fees and interests to these debts.

The debts are then bundled as securities that can be sold to investors. With the additional interests and other charges leveled on these debts, it becomes even more difficult for homeowners to pay them. When the unpaid taxes reach a point where homeowners are unable to pay them, the entity that purchased the tax lien can then take over the properties and they become Florida foreclosed properties for sale.

According to housing experts, this new type of dealings add further to the burden faced by homeowners who are already suffering from the large supplies of bank and FHA foreclosures for sale in the market. Reports from Florida stated that hedge funds and banks are able to bid for these tax liens mostly in online auctions conducted by county and city tax collectors.

Institutions involved in selling these tax debts are reportedly able to get an investment return of as high as 10%. For the part of the lien buyers, they can get their investments back by seizing the properties which end up as foreclosed homes. Another advantage that the buyers of tax liens can enjoy is anonymity.

According to analysts, the bonds are privately sold so no public records are made of who purchased the bonds and how much return they can expect from the purchase. The practice is reportedly beneficial to tax lien sellers and buyers, as well as local governments. However, some have criticized the process as another method that causes homeowners to lose their properties to bank and FHA foreclosures for sale.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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