Buying a foreclosed house if it is sold at auction because the borrower is not able to pay off the riba-based loan

Firstly: 

Borrowing money on the basis of riba is emphatically
forbidden and is a major sin, because Allah, may He be glorified and
exalted, says (interpretation of the meaning):

“O you who believe! Fear Allaah and give up what remains
(due to you) from Ribaa (from now onward) if you are (really) believers.

279. And if you do not do it, then take a notice of war
from Allaah and His Messenger but if you repent, you shall have your capital
sums. Deal not unjustly (by asking more than your capital sums), and you
shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279]

And Muslim (1598) narrated that Jaabir (may Allah be pleased
with him) said: The Messenger of Allaah (peace and blessings of Allaah be
upon him) cursed the one who consumes riba and the one who pays it, the one
who writes it down and the two who witness it, and he said: they are all the
same. 

So it is not permissible to take out a riba-based loan or to
mortgage the house in order to take out such a loan. 

Secondly: 

The one who takes out a riba-based loan is not obliged to pay
the interest; rather he has to pay back the original amount of the loan
only. If he is not able to do that, and he gave something to the lender as
collateral, it is permissible to sell the collateral in two cases: 

1.If the borrower gave permission
to sell it, whether he gave permission at the time the contract was drawn up
or at the time payment became due.

2.If the court rules that it is
to be sold.

It says in Zaad al-Mustaqni‘: When the debt is due to
be repaid and he refuses to pay, if the borrower gave permission to the
lender to sell it, he may sell it and pay off the debt, otherwise the judge
may force him to pay off the debt or sell the collateral. If he does not do
that, the judge may sell it to pay off the debt. End quote. 

The court may appoint someone to sell it, whether it appoints
the lender or someone else. 

It is stipulated that the one who sells it, whether it is the
lender or someone else appointed by the judge, should sell it for the market
price and not for less than that. 

It says in Mughni al-Muhtaaj, 3/71: 

The collateral should not be sold except for the current
price in the local currency of something similar; if that condition is not
met, then the sale is not valid. But if it is a little below the going
price, which often happens when people bargain, that does not matter because
they usually overlook that. End quote. 

Based on that, if the item is sold because the borrower is
unable to pay off the original loan, and that is done on the orders of the
court and it is sold by public auction, there is nothing wrong with that and
it does not matter if the seller did not give consent, because selling an
item when its owner is reluctant is valid if he is forced to do so for a
legitimate reason, and this is not regarded as buying something that was
unlawfully confiscated or taken by force. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: The
words ‘so it [the transaction] is not valid if he is forced to sell it
without a legitimate reason’ – he commented on this by saying: If it is sold
when the owner is reluctant for a legitimate reason, there is nothing wrong
with that, because this is restoring the dues of others, i.e., if we force
someone to sell something for a legitimate reason, this is restoring the
dues of others, and is not wrongdoing or transgression. 

For example: a person gave his house as collateral to someone
for a debt that he owed to him. The time for repayment came and the lender
asked for his money, but the borrower who owed the debt refused to pay. In
this case, the borrower may be forced to sell his house, so that he can pay
off what he owes to the lender.

Another example: A piece of land was owned by two people, and
it was a small piece of land that could not be divided. One of the partners
asked the other to sell, but the other partner refused. In this case the
land may be sold despite the objections of the one who refused, because
there is a legitimate reason, which is to ward off harm from his partner. 

So the guideline is: If forcing someone to sell is for a
legitimate reason, the sale is valid even if the seller does not give
consent to it. Because in this case we are not committing a sin by wronging
him or by any other means, so it is permissible. End quote from al-Sharh
al-Mumti‘, 8/108 

Thirdly: 

There is nothing wrong with buying a house from the second
purchaser and adding it to the mosque. 

And Allah knows best.