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What is the CWCOT Program?

Updated: Aug 31, 2023

The Federal Housing Administration’s (FHA) Claims Without Conveyance of Title (CWCOT) program is intended to find better options to reduce the inventory of properties held by the U.S. Department of Housing and Urban Development (HUD). This program gives buyers a chance to purchase HUD-backed, foreclosure properties through online auctions.


How does the CWCOT program work?


CWCOT properties, also known as second chance foreclosures or second chance CWCOT properties, have had a bit of a journey by the time they reach an online auction event.


CWCOT properties were originally offered at an in-person foreclosure auction. When they were not sold, HUD then gives them a “second chance” through their loan servicers by allowing them to be put up for auction online.


If they are not sold during an online auction event, they are conveyed to HUD by the loan servicer to go into the traditional real estate market for purchase.  


What are the benefits for investors and homeowners?


They can be a great value


Second chance CWCOT properties can be a fantastic deal because HUD usually allows for a deep discount on the price. Buyers also do not have to pay a buyer’s premium (which is often the greater of 5% of the purchase price or $2,500). Most second chance CWCOT properties are also not on the Multiple Listing Service (MLS) alongside traditional listings, so there is less competition.


But keep in mind they are sold for cash only without any contingencies, inspections, or appraisals — the current condition and occupancy is often unknown, and you can’t even visit them without specific approval from the loan servicer before an auction. Buyers are encouraged to perform due diligence on all properties so they are prepared for the auction process.


They help expand access to housing


Some second chance CWCOT properties are also part of HUD’s First Look program for the first 30 days the property is on the market. This program allows mission-driven buyers and eligible owner-occupants exclusive access to submitting offers on these properties during the First Look period.


While in the First Look period, owner-occupants may place pre-auction offers on Xome.com. Government entities and HUD-approved nonprofits may submit offers on and purchase these second chance CWCOT properties by contacting the National Community Stabilization Trust (NCST).

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