When Carmelita and Haywood Mixon first saw the split-level house on Meadowdale Drive in Rockdale, it wasn't exactly in move-in condition.
Water was standing in the basement, the walls were mildewed, the toilet had been smashed with a sledge hammer and the concrete steps were crumbling.
But the Mixons loved the wood-paneled bathrooms with their oversized tubs, the bedroom skylights and lofted living room ceiling.
They liked the views from the expansive back deck and the quiet neighborhood.
And most of all, they liked the financing plan that allowed them to defer mortgage payments for several months until they could make the repairs. The HUD home was for them.
Last year, the Maryland office of the U.S. Department of Housing and Urban Development, which manages and sells HUD homes in all state jurisdictions except Prince George's and Montgomery counties, sold 895 homes -- many to buyers like the Mixons who were looking to save money and didn't mind doing some work.
This year, the office hopes to sell 1,200 homes by the end of September.
But while HUD homes can be a bargain for buyers, critics say they are an invitation to investors to turn stable neighborhoods into transient rental housing.
"We need the community to be outraged. We need the banking community to be outraged. We need the city housing department to be outraged. We need the media to be outraged," said Vincent P. Quayle, director of St. Ambrose Housing Aid Center, a nonprofit housing provider.
Maryland HUD officials reply that they are trying to encourage home ownership and that 65 percent of the homes they sell are to people who plan to live in them.
An unknown number of the homes sold to investors eventually are resold to people who will live in them.
HUD acquires the houses in several ways, but usually through a foreclosure on a house with a mortgage insured by the Federal Housing Administration (FHA), a branch of HUD.
In 1994, FHA insured 35,800 homes in Maryland, outside of Prince George's and Montgomery counties.
Sometimes mortgages are assigned directly to HUD, which may foreclose on a borrower.
Occasionally, a buyer unable to make the payments will sign the deed over to HUD rather than face foreclosure.
But more frequently, the lender forecloses on the property and files an insurance claim with the FHA. The lender then turns the property title over to HUD.
Generally, it takes HUD six months to acquire a property after the first foreclosure notice has been sent, said Candace S. Simms, director of the Maryland HUD office's Single Family Housing Division.
On average, the Maryland HUD office acquires 80 houses a month.
Its current portfolio includes 732 properties that range from inner-city rowhouses worth a few thousand dollars to homes in Crofton worth more than $150,000.
After HUD obtains the title to a property, the house is appraised and a suggested retail price is posted.
If repairs are needed, an escrow account may be set up to help the buyers pay for the work.
The properties then are placed on the multiple list and advertised in the newspaper.
For the first 20 days that a property is on the market, only people who intend to live in the home may make an offer.
Prospective buyers need only to contact a licensed real estate agent to fill out the necessary papers.
All offers for the full asking price are opened the same day as they are received. If more than one offer is received, the home goes to the highest bidder.
If no bid is received during the first phase, HUD takes another look at the asking price, comparing it with similar properties in the neighborhood.
The house then is listed again, and this time is available to all, including investors.
Mr. Quayle argues that HUD doesn't do enough to prevent the properties from falling into the hands of unscrupulous landlords who make a minimal repairs.
"The driving force of that [HUD] office is to unload the properties and get the money back," he said. "This is where I would challenge their philosophy."
He points out that in Northeast Baltimore, 20 to 30 homes are turned into rental properties each year because of HUD's willingness to sell to investors.
Between Oct. 1, 1993, and July 13, 1994, 18 of 37 HUD homes sold in the community went to investors.
Mr. Quayle and some real estate agents say many of the HUD homes are in such poor shape that most home buyers -- especially first-time buyers -- are frightened away.
And David G. Sann, St. Ambrose's northeast project coordinator, points out that in today's buyer's market, the unrepaired HUD homes are at a particular disadvantage.
"Investors are getting them because of the condition they are in," said Janie Lee, a real estate agent who works primarily in the city.
Ms. Lee said she tried to show one HUD home recently, but couldn't get past the front door because the roof was caved in.
"We just walked out," she said.
"First-time buyers, they want to see what they're going to get," she added.
The problems generally are with the homes selling for under $75,000.
PTC Those in good shape are snatched up quickly, she said.
James S. Kelly, a HUD economist, said in the past, HUD tried to paint and repair homes before putting them on the market, but was unable to recoup its money. But starting this summer, the local HUD office plans a new approach -- handing its asset management operations over to a company that will be in charge of marketing as well as managing the properties.
Ms. Simms said HUD continues to encourage home ownership by marketing HUD homes at housing fairs, holding workshops for real estate agents to explain the program, and encouraging nonprofit agencies and local governments to bid on houses that they then can repair and sell to home owners. Last year, the local HUD office sold 12 houses to nonprofit agencies.
St. Ambrose Housing bought one house with the help of a federal grant, but the agency doesn't have money to buy more HUD homes, Mr. Quayle said.
"We can't go out and buy them and fix them up and make them work," he said. "We're not going to put shoddy stuff on the market."
Not every HUD home is a wreck. The Mixons' son bought a HUD condominium in Baltimore County that didn't need a bit of work. In fact, four members of the family have bought HUD homes, thanks in part to the encouragement of Mrs. Mixon's brother, a real estate agent who specializes in HUD sales.
Still, the Mixons would be the first to say that buying a HUD home isn't always easy. The paperwork can be baffling, especially if the real estate agent isn't familiar with HUD procedures.
And handyman talents can be helpful.
An appraiser originally told the Mixons that their home would require more than $20,000 worth of repairs. But Mr. Mixon, a carpenter, knew he could do the work for half that amount.
With other houses in the neighborhood selling in the $120s, the Mixons bought their home last spring for $93,000, plus an $11,000 repair loan.
During the next seven months, they fixed the plumbing, gutters and wiring and replaced the furnace, water heater and stove. They put new walls in the basement and repaired a broken toilet and sink.
"We had a lot of enjoyment working on it together," Mrs. Mixon said. "But I think we would not have attempted this if my husband wasn't a carpenter."
"This house needed work," Mr. Mixon agreed. "But I loved the neighborhood -- and the bathrooms."
Pub Date: 4/14/96