by Jeff Dixon, Business Development Manager

Does your IRA have a loan out on real estate?  Making a secured home loan from your Self-Directed IRA can be a great way to grow your retirement account. However, sometimes borrowers are not able to re-pay the loan and as a result, you will have to foreclose on the property. The current Covid-19 crisis has prevented millions from working and this is causing problems with paying rent which in turn, can cause landlords to miss making mortgage payments.  Nearly a third of tenants missed making their April 2020 rent payment.

Foreclosure Process

Starting the foreclosure process begins with contacting the borrower and seeing if there are ways of helping them. For instance, the loan could be modified, to allow new terms of repayment. You might allow missed payments to be added to the loan balance. The owner might be able to sell the property to a new landlord more capable of handling the costs of owning property. Additionally there are many state and federal assistance programs for homeowners and tenants. You will find foreclosure avoidance counseling at or by calling 888-995-HOPE. You can also refer to a previous article we wrote about helping tenants. Click HERE

Who Pays Foreclosure Expenses?

Foreclosing? The IRA must pay for all expenses associated with the foreclosure. You cannot use any personal funds. You might want to use a professional service to assist with the foreclosure to help insure it is being done according to local, state and federal laws. If not done correctly, it can delay or even prevent the foreclosure from occurring. Here is a link to an article in which describes the foreclosure process. Click HERE

What Happens When The Asset Goes from a “Note” to a “Property”?

You finished foreclosing—now what? When the foreclosing on a loan made by your self-directed IRA is complete, you will receive a foreclosure deed. Most importantly, this deed needs to reflect the titling of the IRA as the new owner. Send this deed to the IRA custodian for processing along with an appraisal to establish the current market value of the asset. Keep in mind what is occurring means the existing asset, the loan, is no longer in existence and the IRA has acquired a new asset. That is to say the new asset is the property. Now that your IRA owns real estate, your IRA must pay for all expenses associated with the property. You would send all bills to the IRA so we can pay them from the IRA account. Rent checks are made payable to the IRA as well.

uDirect IRA Services is here to help with your Self-Directed IRA questions or with questions on foreclosing on a loan made by your self-directed IRA; to find out more, contact us today.

Please reach out to us at 714-831-1866 or if you have any questions.