What is HUD?

It might be a short texting acronym for How yoU Doing.

It is actually The Department of Housing and Urban Development.

 Check them out yourself here:  www.hud.gov

What exactly is a HUD Home?

HUD is a government agency.  The Department of Housing and Urban Development.  They back up FHA Loans and when these default, HUD can end up liquidating the assets on the open market or through other channels.  They also promote home ownership, so they can offer first time home buyers some good options through their various program.  In addition in these tough times they are heading up the government directives like “Making Home Affordable” program. 

Learn more about Making Home Affordable here:   http://www.makinghomeaffordable.gov/

According to their web site:

“HUD’s mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. To fulfill this mission, HUD will embrace high standards of ethics, management and accountability and forge new partnerships–particularly with faith-based and community organizations–that leverage resources and improve HUD’s ability to be effective on the community level. “

So what does this mean to you.    Well HUD works with FHA (The Federal Housing Authority) and when someone defaults on their FHA guaranteed Loan or Mortgage, then the house can end up going back to HUD to liquidate if it hasn’t been successfully sold previously by the bank or the home owner in a short sale.

If a house is very upside down, it may be destined to go to HUD, because FHA has minimums they are allowed to take in a Short Sale based on the original purchase price, appraisal and loan amount.  So if a house was way over-priced a couple years ago or has really declined in value, no buyer will be willing to pay what FHA is required by law to take as a minimum amount.  Then the home goes back to HUD to liquidate.

For the State of Colorado and in Montrose the REO Management Company used by HUD is MCB  (Michaelson, Connor and Boul).  They handle all the liquidation for HUD in a region of the United States including Colorado.  http://www.mcbreo.com/st_comain.htm   According to their website, they also cover Arizona, Michigan, Montana, Nevada, Utah and Wyoming.

HUD hires through their REO Asset Management Company one Real Estate agent for a very large multi-county region, they get a small amount of money for listing each of the properties in the MLS.    For Montrose Colorado this agent is Marilyn Hammar.  (Please don’t call her.  She just puts them into the MLS for the Government.  She doesn’t do photos, she doesn’t inspect the properties, she doesn’t have knowledge of them beyond what she is provided…)    Here is a link to a list of all the local listing Brokers for MCB REO in Colorado.  Use these names for your local agent to easily search (by agent) all the HUD homes in an area…

http://www.mcbreo.com/colorado/collb.htm

HUD typically has the homes winterized and secured with a standard key that is the same for all HUD homes in an area.   This allows any agent to show the home (as long as they have a HUD key in their office). 

A Real Estate office and its Broker Owner (Here at Century 21 Action Realty in Montrose Colorado, that is Ninah Hunter) must be registered with the company responsible for liquidating HUD assets in your region in order to make offers on properties.  This is not hard but does require some paperwork.  Once done any of the employed agents or brokers can submit HUD offers on behalf of their buyers.

Sometimes HUD properties will be featured in Auctions, online or offline.  Here in Colorado MCB allows electronic bidding.

Just like with Bank Owned properties don’t expect HUD to fix a lot of things for you.  You are better off documenting the need and reducing your offer price and then taking care of these things yourself.

HUD/FHA do offer a “K” Loan (a small version of their 203K Rehabilitation Loan).  The “K” Loan allows a buyer to finance in and escrow the repair costs for the home.  The repairs must be cosmetic and not structural in nature.  The FHA 203K Loan will handle structural repairs but it is a lot more paperwork.  The “K” loan is perfect for repainting, replacing carpet, built in appliances, tile or linoleum, etc.   The 203K grown up version can be used on a complete gut and remodel.  They lend based on the “after repaired appraised value“, then the draws are handled like a construction loan.

So what are you waiting for go out and buy a HUD home today… Just kidding, but it sounded good. 

If you are in the market already for a house and you are looking for something that might need a little work, a HUD home is a great place to look…

But a Realtor is really the best place to start, because they will have HUD homes, Bank REPOs, Short Sales, Desperate Sellers (Divorce, Illness, Death), etc.   They allow you the best shot at looking at the whole market.  But it never hurts to look around a bit on your own.

Check out my websites for properties and homes in the Montrose Colorado area.

www.SoldCORE.com

www.COrmsbee.c21actionrealty.com

www.MontroseGoldTeamBlog.com

Hope this helped you get a better understanding of what a HUD Home is and how you might go about looking at one.

If you want to buy or sell a home in Western Colorado, especially in Montrose and the surrounding areas, give me a call.  My name is Chris Ormsbee and I can be reached on my Cell phone at (970) 209-0252.

Should You Refinance Your Home Mortgage?

Drop it by at least 1% on a comparable Mortgage.

Typically a good mortgage broker will tell you that you need to drop your interest rate by 1% to make it worth your while and pay all the fees (origination, appraisal, recording, etc.).  So if your rate is 7% or more and you are planing on staying in the home, it should be a no-brainer… refinance!

Consider the Terms of Existing Mortgage

You also need to consider the terms of the existing loan.

Are there any prepayment penalties, or prepaid mortgage insurance?

Is the Mortgage (Note and Deed of Trust)  a fixed or a variable rate loan?

Right now the variable rate loans are still in the 4%-5% range and some HELOCs (Home Equity Lines of Credit) are running even lower.

Variable Rate Loans - are not by definition bad and can be useful for the right circumstances.  For example if you know you will sell your home (due to kids leaving, divorce or marriage plans, etc.), then a 3 or 5 year fixed rate loan that is a lower than a fixed rate loan now and adjusts later might be the best decision for you.  A good mortgage broker or lender should discuss your overall financial picture with you and try to help you determine what will best fit your needs.   The bottom line is you are borrowing money and the lowest interest you can pay on that money is the best deal… but you need to look at both the short term and long term realistically.

A key problem with these ARM (Adjustable Rate Mortgages), that has given them a lot of bad press and even the blame for the flood of foreclosures on the market, is that they were sold to people unscrupulously (not explained accurately) or the people were just more optimistic about their futures than they should of been, but they have been used successfully by millions of people.  

You have to pick the right tool for the Job.  As a rule for the average homeowner, first time home buyer, etc. I would recommend a fixed rate 30 year note and suggest strongly to them that they should regularly pay in an extra couple hundred dollars to pay it off in 15 years. 

What position is the loan you want to refinance and are their others that will be affected?

If you have a second or third mortgage, It is rare but possible for them to complete a subordination agreement, to allow the first to be “re-written” and/or remain in “first” position.  It might also be possible to consolidate multiple loans into one loan, however if you go over 80% of the value then you will be paying mortgage insurance often called MIP or PMI. 

The Mortgage Insurance Premium, effectively raises your interest rate, but will go away after you reduce the mortgage principle balance to 78% of the LTV (Loan to Value).  It is like the Credit Card “Insurance” protection that if you lose your job they will “hold” the account “for only .89 per 100″ (just pitched to me today on an account with a balance of over 13,000, so for only…. $115/MO insurance, I can have the surety that if I cannot pay, I won’t have to.   It is basically an extra 1% (.089) of interest monthly which is effectively raising my interest rate by 10% annually…. Thanks but NO THANKS… I never do this!)

The MIP or PMI is not that expensive but is usually about 1 to 1 1/2 percent additional interest or at least cost to you, which is a cost of borrowing the money, so I call it interest even though it is actually insurance.

Insurance Sucks, but is a necessary evil in our society.  But Credit Card Insurance and Mortgage Insurance in general should be avoided wherever possible.

Other Considerations…

It is amazing but very few people actually read their Note and Deed of Trust, but they really should…

The Note and Deed or Trust or in some cases a Mortgage, defines all the terms surrounding your debt and its expected repayment as it relates to the lender (usually a bank). 

The Note and Deed of Trust also defines what constitutes a default of the terms and what the default interest rate and penalties are.  The other critical thing is when the Deed of Trust is recorded, this defines the order…. So your primary loan is usually in the first position.  Subsequent loans would take, second, third, etc.

A Deed of Trust is a three party document, you have the Lender, the Borrower and the Public Trustee (at least in Colorado).  This is a publicly recorded document and it defines essentially a contract of your repayment.  If you should default on this contract, i.e. not pay your mortgage, then the lender/bank has the right to foreclose on the Note and Deed of Trust by filing a Notice of Election and demand.  

PLEASE NOTE:  If you are behind on your current mortgage your chances of refinancing are probably very low.  Your best bet is to try to do a Loan Modification.  A late mortgage payment is a big credit score ding that stays with you for about 2 years, it is essentially the same as a Short Sale.

So how low will Mortgage Rates go?

Rates are low and no one knows for sure when they will go up but the consensous is that they will eventually go back up.  Based on the fact that they are at historic lows it seems inevitable.  Yet with the housing market being what it is, with a flood of Foreclosed, Reposessed, REO properties, often in “rough” condition, but still selling at a significant discount to the neighbors house that is a FSBO (For Sale By Owner) or the other neighbor who is trying to get the price from two years ago when the market was vibrant and a “sellers market”.  It is without doubt a “buyers market” right now.  Prices are down, bargains and deals are all over the place and interest rates are low.   

A key problem is the money supply is very tight.  The required credit score is much higher than it was two years ago.  Stated Income or “Liars” loans are a thing of the past, which I think sucks, cause a self employed Realtor has to “Project” or “Plan” on an income, but obviously is not in full control of that destiny, and for that matter neither is the guy who has worked for the County for 20 years or the big Corporation, etc…   None of us know the future, so I think the bias to W2 employees, by completely ditching the “stated income loan” is BS…. But that is just my opinion! 

I think this whole default debacle was created on Wall-street, when they packaged up ”crap” loans with a few “mid” rated loans and a few “good” loans and called it a “better than average” portfolio of loans and sold off these 100 million dollar packages at a higher than fair or market rate and then the crap loans in the portfolio started to default, now we have essentially a B rated “Bond” that is really a “D” or ”F” and it screwed up the trust and rate factors in the secondary market.

Overall is was a Madoff like plan to rob wealth from the masses…  This was done by Investment Banks, that our government Republican and Democratic has decided to “Bail Out” with our money… So now the Government is incentivising the banks to “work with people” and in my opinion promoting further default.

Its scary folks, but all we can really do is play the game as best we can amongst the rules and players that are present here and now.

I just heard today that many banks are currently holding onto some of their REO properties waiting to get a higher price… Apparently they are getting tired of losing money.   Those big bonus checks from the TARP money must be stopping…

Sorry about the rant.

So where will rates go?

Easy answer no one knows…  I think up eventually, I just don’t know when.  If you do an ARM you are betting they will go down or hold basically flat so you can redo the ARM or convert/refinance into a fixed rate mortgage if you stay in the home.

I remember paying 12% in the late 80s and thinking I had a good rate.  So everything is relative.  Right now rates are running in the low 5% range, but I also have a variable rate HELOC that is only charging me 3.5% right now. 

My General Advice on Mortgages is:

I usually recommend to my clients to get a fixed rate 30 year loan even if they intend to pay it off in 15 or 20 years.  Most loans allow prepayment of the principle without any penalties (you want this kind of loan). 

So if you have the 30 year loan and amortize your payments for the 15 year loan then you should payoff your home in 15 years, but if you get laid off or otherwise lose your income stream then you have a lower mandatory payment. 

Realize however, that even if you have been paying an extra 200 per month for 20 years if you don’t make the required minimum payment, they don’t count the extra you have paid toward the amount due.   Therefore every home owner should try to save up 3-6 months of mortgage payments to cover rough times.  

This is also where a second line of credit or HELOC (Home Equity Line of Credit) can come in handy and could be drawn down to cover the monthly payment of the first mortgage.  It can and should be used as a type of safety net.  Its best to construct or define your net before you need it.  Once you need it you may not qualify for it.  In otherwords they too look at ability to repay and employment, etc.   If you lose your job you might not qualify for a HELOC.  If you get the HELOC first, then lose your job, you can draw from the HELOC.  (They seldom if ever based on my knowledge - requalify the individual before drawing actual funds.  Therefore the static qualification now to establish the HELOC is good until you either close the account or try to refinance your first mortgage.

So happy borrowing and while I love cash buyers, they are typically retired people that have had a whole “successful” life to save up money or gain equity in their prior home, so for the proponents of ony ever buy anything with just cash…  My advice is think about borrowing, there are bargains everywhere and rates are low.  Keep you cash so you can be sure you can make the payment.  Borrowing and Lending and even charging interest aren’t evil as some would suggest, they are just business.

Good Day!  Chris

Chris Ormsbee is a license Real Estate Broker in the State of Colorado.  He works for Century 21 Action Realty in Montrose, CO 81401 at 1245 E Main St, right on the NW corner of Main St. and San Juan Ave.
Chris Ormsbee is not a lawyer or an accountant but he is a “real” person and an Internet Marketer and he has occasionally slept at THE Holiday Inn Express!

Check his other stuff out at:

On Facebook as myself: ChrisOrmsbee

Real Estate Blog: http://www.YourCOREAdvisor.com/blog

Divorce Advice Blog: http://www.thedivorceworkshop.com/

Wacky Ideas, Thoughts and Whatevers: http://ideasthoughtswhatevers.blogspot.com/

An Instruction Manual for a Home!

This is sweet!  And a great idea for anyone with custom features in a home that could use a little explaining.

OK THIS video is kind of crude.  It is for  a Bank Owned, REO (foreclosed, repossesed from a former owner (Not the one in this film… ))  This was the original owner, who had left a VCR tape for its future guests, inhabitants or owners.   I just filmed it playing on a TV with my flip camera so the quality isn’t as good as it is on the original tape (which will go with the home).   

If the buyer of this home requests it, I may delete these videos from Youtube later but wanted to have it available on the web for a client or all clients for that matter (who might be interested in living “Off the Grid” and decided this would be the easiest place to pop it up there for now. Plus I said I would post regularly.

So what good does this do you… Well if your thinking of buying a Solar Powered Home near Telluride Colorado, then this is the instruction manual to your new home… Otherwise the main benefit would be some general education about having a solar and wind generated home and ways or ideas on how to conserve energy.  

VIDEO 1:

Solar System Operations Manual 312 Elam Ridge Rd Part1

VIDEO 1:

Solar System and Stereo Instruction Manual 312 Elam Ridge Rd

VIDEO 3:

Solar System and Kitchen Manual 312 Elam Ridge Rd

Cant afford this home?

You could also check out this cool looking ebook I found on saving energy in your existing home (with or without solar power) at http://budurl.com/SaveElectricity  I haven’t bought it yet, but for $20 I plan to.  The video sales pitch seems to be talking about the same kind of issues of saving energy by keeping some appliances and items from drawing electricity even while they are shut off.   If you buy it before I do, let me know what you think of it. 

Or if you want to help me out, check out these clickbank products on solar, wind and energy saving products in this little hoplink widgets… Note if you do buy something I will make a commission off of the product, thus you would be helping me keep on bloggin.

Thanks, Chris Ormsbee