Housing Assistance Program and Concurrent Receipt (CRDP) Updates
May 15 2009
• The Housing Assistance Program (HAP) is to help minimize losses to members selling homes during the housing slump. DOD announced the guidance on the program. A priority order has been established to determine who gets assistance and how much.
Priority 1—wounded service members relocating to medical facilities and survivors whose service member died while deployed.
2—members affected by the BRAC.
Priority 1 and 2 members can be reimbursed at 95% of your loss OR government purchase of your home at 90% of prior fair market value (purchase price) for wounded and survivors while 75% for BRAC members.
3—PCS move members.
Priority 3 members can be reimbursed for their loss at 90% OR be eligible for government purchase at 75% of prior fair market value (purchase price).
More details are outlined on the Corps of Engineers site.
• Congress and the President’s budget proposals look to expand the concurrent receipt program know as Concurrent Retirement and Disability Pay (CRDP). Nothing is in concrete obviously until the bill is signed by the President and that is a ways off.
If things stay the same, the improvements affect Chapter 61 members only; medical retirements. All years of service are included; more and less than 20 years service. The CRDP would be phased in over the next several years based on your disability rating. 90-100% ratings get full CRDP starting Jan 2010. The next year 70-80%. Then 50-60%. Then 30-40%. And In 2014, 10-20%. To clarify, in 2013 and 2014, ratings of 10 to 40% will earn CRDP IF you were retired as a Chapter 61 member. Non-chapter 61 retirees with 40% or less ratings would not qualify for CRDP.
MOAA continues to fight for bills supporting CRDP for non-Chapter 61 members with less than 50% ratings. See our MOAA site for contacting your elected reps and seeking support on the CRDP bills.
I know some of these chapter 61 retirees and they are certainly deserving and it is really disconcerting that they have been so far down the totem pole………..The cost of waging war is always more than we think………
I am thankful for the inclusion of PCS movers in HAP but it is frustrating over the amount of time the entire process is taking. I paid over 1/2 of my yearly salary to close on my home in AZ so that I could re-locate my family with me in VA. To date, we are still waiting for the rules to be published in the Federal Register before any claims can be processed per the HAP website. I am thankful that I never lived outside of my means and therefore had the money to utilize vice the scenario that many others are in which is causing them to foreclose, short sale (if they can) or leave their loved ones behind which in turn impacts their financial status in a negative manner. It is not rosy and the program is not intended to fully reimburse us for our loss: as some may believe. Furthermore, any reimbursement we receive will be considered taxable income which in the long run, equates to a smaller reimbursement.
Mr. DuBose’s last point is a critical one for those seeking help through the expansion of HAP. MOAA involvement on this issue would be greatly appreciated, but in the meantime, I have written the National HAP program office and my two senators to see what we can do to straighten out the incentives so that they make sense. The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on 20 Dec 2007 and, in general, it allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. In other words, “benefits” received via a short sale or foreclosure are NOT considered taxable income.
Benefits from HAP should be treated the same way, but instead, they are treated as taxable income. This will prevent many qualified applicants from not being able to take advantage of the program. Or worse, some will receive benefits and unknowingly incur a tax liability that they will be unable to pay.
At this point in time, servicemembers have more incentive (financially speaking) to short sale or foreclose on their home than to seek help through HAP because the tax implications are much more favorable. To put that statement into real numbers, a servicemember will suffer poor credit for a number of years after foreclosing or short selling their home, but if the government pays $100K via HAP, he/she would likely pay up to $30K to the IRS. For those that don’t live paycheck to paycheck and don’t really need stellar credit, the choice is clear. Maybe not easy, but clear. The best financial decision is to foreclose.
We need to change the treatment of HAP benefits so that they are considered NONTAXABLE. The result would be that more servicemembers will use this program instead of foreclosing on their homes. I urge you to get involved and help realign the incentives to fulfill the intent of the HAP expansion.
I am confused about the tax implications of HAP. If we are 40,000 upside down on our home, we would have to pay taxes on that 40,000 if we sell?? Would we not have to pay taxes on the $40,000 if we short-sale???
Fortunately it appears the HAP benefit won’t be taxable if things go as planned by the DOD. If it is taxable, the financial benefit you would receive from the HAP would be considered income for tax purposes. Normally short sale and other forms of debt forgiveness are also considered taxable. But there is tax relief for these times currently under the Mortgage Forgiveness Debt Relief Act of 2007. Read more about it here: http://www.irs.gov/newsroom/article/0,,id=205004,00.html
P.S. If you are currently serving, I would check with your legal office, commander and personnel office to see how a short sale or foreclosure will impact your career and security clearance. Better to be safe than sorry.
I understand to qualify for expanded HAP your home cost cannot exceed fannie mae and freddie mac limits. Some buyers put 20 percent cash down and had fixed rate mortgages and did not overextend themselves but still took 90K $ hit when selling home for PCS. As a result, the more affluent military members are no longer spending money in the marketplace. Ultimatley affecting the overal economy. Long story short do not buy what you cannot pay for.
This program seems to be structured for people who made poor choices.
Is the Federal Register Lost ? Does Bin Laden have it ? Someone needs to find it ASAP so the rules can be published. This is ridiculous. Im lucky to been able to rent my home for 900 less than the mortgage but my tenants are leaving and im sinking fast. HELP
The Military Family Tax Relief Act of 2003 specifically excluded most HAP benefits from taxable income. However, DoD does not think the 2003 act applies to the expanded HAP (although they would like it to apply). When I asked if HAP’s understanding was that the 2003 act did NOT apply to the expanded program, a HAP representative responded, “Yes. It is my understanding that attorneys at OSD level have reviewed the law and determined the current tax laws require that ARRA Expanded HAP applicants will be taxed on all program benefits above their home’s current fair market value as part of their gross income.” I am confident this was not Congress’ intent when they expanded HAP, since the Military Family Relief Act of 2003 and the Mortgage Forgiveness Debt Relief Act of 2007 both work towards reducing the tax burden due to mortgage debt relief. I urge individuals and MOAA to get involved to ensure Congress’ intent in expanding HAP is fulfilled.
ALL THAT HAP AND EXTEND HAP DOES IS TO TAKE CARE OF THE BANK AND LEAVE THE SERVICE MEMBER HOMELESS. THESE PROGRAM IS INTENDED TO BENEFIT THE BANKS AND NOT THE SERVICE MEMBER. FOLLOW THE MONEY!!!!
Its true HAP does NOT help our brave men and women in unform
with a mortgage principal reduction or Loan modification option.. Its a fact that this program will leave a huge number of Military Service members HOMELESS>>>>
FYI:
Tax Liability of
Expanded HAP Benefits
• Expanded HAP benefit tax liability was
eliminated when the President signed the
Unemployment Compensation Extension
Act of 2009 into law on 7 Nov 2009.
This is in the Army Core of Engineer’s HAP Expansion Brief/Nov 09
HAP worked for me… yes, it took time, and yes, I had to drain assets to close the sale and wait for HAP to reimburse me. However, I sit here today with $100K that I wouldn’t have without HAP and my loss was limited to 10% of purchase price.
Don’t knock a Gov’t program to “bailout” those of us that made poor decisions and bought in a real estate bubble… there are thousands out there that don’t have a bailout option and will have destroyed credit because of it.
HAP benefits are also now NON-TAXABLE. Hopefully, the people taking advantage of HAP will be able to buy a reasonably priced home at their next duty station.
I sold my house with a Short Sale. The bank accepted the short sale and “wrote off” the $145K as a loss. This loss affected my credit and I had to file bankruptcy.
Can anyone tell me if I’m eligible to receive any portion of the $145K back under the HAP Program?
Yes..They will reimburse you up to 90% of your loss….Good Luck..I hope it works out for you..you sound like a really nice guy…
HAP only helps some service members. In fact, if a Service Member is doing the correct thing and PCSing every three years, no help is offered. Congress should adjust the date to help those who really need it.
What are they going to do about the people who, like us, did put down 10% and are still taking a 50K hit on our house? We bought in 2007 so aren’t eligible for HAP. It woudln’t be such a big deal except for the fact that DH made LDO so now we’re moving two years earlier than planned! I either have to stay here with the kids and wait for the economy to improve or hope congress extends the program to those who bought after 6-1-06
left out also we will be lucky to eat!! seems so unfair some get help some dont why did wer have to pcs in tjhis mess of an economy have had house on market almost a year !!!!!!!! day lat and a dollar short
Are any members of Congress considering HAP relief for servicemembers who purchased homes after 01 July 2006? Military PCS moves have continued in the course of military duties, and servicemembers continued to purchase homes in the second half of 2006, 2007, 2008 before the mortgage crisis became readily apperant to most Americans. In fact the mortgage “crisis” did not impact many areas of the country until well after the stock market collapse in 2008. I have seen first-hand many sailors who worked for me and who purchased homes in the latter half of 2006 and in 2007 who PCS’d in 2010 and are in foreclosure or short sale situations with no HAP relief. At my current duty station (Pacific Northwest), the housing market did not collapse until 2009, leaving many 2006, 2007, and 2008 purchasers substantially underwater in their homes. Those who have to execute military PCS orders in 2010, 2011, or beyond don’t have the flexibility to “sit and wait out” the market.
CDR Stocking, I’d love to talk to you about your question. I am wondering the same thing and am researching my options. Congressman Connolly (VA) introduced H.R. 237 that addresses your question. At present H.R. 237 has been “Referred to Committee” according to this website (http://www.govtrack.us/congress/bill.xpd?bill=h112-237)
I am following this closely because I bought in March 2009. Some unfortunate, personal things happened to me and then I was forced to retire (HYT lowered). Now I am stuck in a high cost of living area with a home that is going to sink me whether I opt to stay and live in it or sell it.
I need help. My congressman’s office is my next stop. When I called Mr Connolly’s office they told me to talk to my congressman and encourage him to co-sponsor H.R. 237. Maybe you should do the same.
Hope this helps. Love to talk more with you about this and my plan.
John
I’m in the same boat as CDR S and MSgt J. I just missed the 1 July 2006 cutoff date for a house purchased in Arizona and it would take a huge portion of my liquid life savings to get out from under it. I own other assets so short sell / forclosure exposes me to additional risk if I went that route. I am able to manage so far but many of the younger enlisted and junior officers that found themselves in a similar situation have really struggled financially as a direct result of their military service (they call them “orders” for a reason). My wife wrote Sen McCain a very eloquent letter on the issue and never even got a response. This is being sold as a bailout for military folks, when in reality, it has been in existence for years for non-military government employees. Shame on us–we should be treating our people much better than this. Anyone know if MMOA has taken an active lobbying effort on this issue?
All-I am a military spouse, veteran, and Realtor. I have worked with quite a few HAP beneficiaries. I am very concerned about my extended family. Very interested in hearing which Congressional Reps have been contacted and what the response has been. Given the state of Federal Balance sheet, I doubt very much we will get additional funding or changes to include more folks for HAP. However, I would like to bring together a plan to be proposed to Reps that would be the military members in housing crisis equivalent to a “Soldiers and Sailors Relief Act” that we have for active duty recalls. Anybody with me? Google me…