What is  a HUD home?  It is a property that has been acquired by HUD (not foreclosed by HUD, as is popularly believed).   HUD acquired the home from the bank that did the foreclosure when the lender's FHA loan went into default, so title was transferred to HUD by the lender after foreclosure.  In an FHA loan, FHA "insured" the loan would be paid as agreed. When it wasn't, FHA paid off the lender's claim, and obtained title and keys to the property.  So it is simply an FHA loan that was foreclosed by the bank, then transferred to HUD in exchange for FHA paying the lender the amount of the FHA insurance.  Then HUD places the property on the market for sale.