Financial Frontlines®

Homeowner assistance program begins tomorrow

By Karen Jowers – Staff writer
Posted : Tuesday Sep 29, 2009 12:13:16 EDT

A program to help military homeowners caught in the downturn of the housing market can start processing applications Wednesday, sources said, with the scheduled publication of the implementing rules in the Federal Register.
About 4,300 homeowners have already applied for assistance under the expanded Homeowners Assistance Program, which was signed into law Feb. 17 with $555 million in funding. Eligible are people on permanent change-of-station orders, wounded warriors, surviving spouses and those affected by base realignment and closure actions.
Wounded warriors and surviving spouses receive priority in the program, although about 98 percent of the applications received so far have been in the PCS category.
The Army Corps of Engineers, which runs the program, has been increasing staff and preparing to start processing applications. Some service members have said that HAP officials have been doing initial reviews of their applications, asking for more information, to further prepare in advance.
But the primary issue that has held up the program for six months still looms: Homeowners who receive benefits under the expanded HAP will have to pay taxes, and the taxes will be withheld upfront. Recently introduced legislation that would fix the problem and make the benefits tax-exempt is still pending.
For now, the tax requirement will limit the number of people who can be helped, because service members who are “upside-down” on their mortgages — those who owe more on their mortgages than the sale price of their homes — would not have enough money to take to the table to close the sale.
Defense officials have been exploring options that could help these service members.
Each individual’s situation will be different, and service members will have to decide what is best for their circumstances.
If they qualify for the program, those who have already sold their homes at a loss can be reimbursed for part of the loss, minus the tax withholding.
The program is retroactive for those who received PCS orders on or after Feb. 1, 2006. Homeowners affected by PCS or base closure actions must have purchased homes before July 1, 2006. Additional eligibility requirements will be included in the final rules.
Although there still will be a 30-day comment period on the implementing regulations in the Federal Register, the Corps of Engineers will be able to process applications starting the day of publication.
The tax issue is out of the Defense Department’s hands, and the Office of Management and Budget and the Internal Revenue Service had tried to come up with a resolution. Assistance under the original HAP, created to help those affected by base closure actions, is not taxed. But that tax exclusion was not written into the provision that expanded the program.

You mean there’s a way to cancel my SBP due to my VA rating? Yes, there is. But whether you should exercise this option is a whole ‘nother matter.

You have an irrevocable option to cancel your SBP due to your survivor’s eligibility for the VA’s Dependency and Indemnity Compensation (DIC) survivor annuity. A service-connected VA disability rating of totally disabling (100%) for 10 continuous years, or at least 5 years at 100% if from the date of Service separation, makes a survivor eligible for DIC. Spousal concurrence is required to cancel SBP.

This option was established because a survivor’s SBP annuity is reduced dollar-for-dollar if the survivor also receives DIC—the SBP-DIC offset. Cancelling SBP because of DIC allows a survivor to receive a refund of all SBP premiums linked to the denied SBP survivor payments.

Here’s the catch before you cancel. MOAA is working diligently to have the SBP-DIC offset eliminated. We’ve made headway the last few years as survivors now receive a portion of their SBP payments that were previously denied due to DIC. Should the SBP-DIC offset be totally eliminated, canceling your SBP now due to potential DIC payments denies your beneficiary the opportunity for full SBP and DIC payments in the future. Consider all the possibilities.

If you are a combat veteran, this applies to you.

Were you discharged from active duty on or after 28 January 2003? Then you are eligible for enhanced VA health care enrollment in Priority Group 6 for 5 years after your discharge—assuming you are not already in a higher Priority Group. This applies to vets currently enrolled VA health care and new enrollees.

For those of you discharged from active duty before 28 January 2003, you can enroll and be placed in Priority Group 6 through 27 January 2011.

“Priority Groups” is how the VA manages the demand for health care with their available resources. There are eight priority groups with group 1 getting top priority and group 8 the least priority.

Eligibility and enrollment under this expanded program makes veterans eligible for retroactive refunds of copayments made for medical services and prescriptions associated with your combat experiences. The VA is reviewing their records to see if any current VA health care veterans are due a refund. If you are eligible, you will receive a letter from the VA explaining their actions to reimburse you. Letters will be mailed in November and refunds should be paid by December.

If you have any questions please call 800-983-0932.

Some of our most cherished family possessions are those that have been passed down, generation to generation. An old pocket watch or military decoration may not possess any intrinsic value but it can be a priceless memento of a beloved relative. Unfortunately sentimental value can be misapplied.

Take, for example, inherited shares of stock. The deceased may have been a savvy investor or may simply have acquired shares from his employer. How or why he bought the shares may have been important at one time, but no longer.

His heir has now become an “accidental investor.” It is doubtful that this heir would have chosen these shares on his own. In fact, it is likely that he has very different investment objectives than did the deceased. Elderly investors generally own income-oriented investments which are appropriate for their circumstances but are really not suitable for younger investors who can benefit more from growth-oriented securities.

Nevertheless, having inherited these shares, some people mistakenly begin to treat these securities like family heirlooms. There have been times when I have advised clients to sell inappropriate investments only to hear “Aunt Minnie left those shares to me so I could never sell them.” But if I asked if that would also apply to Aunt Minnie’s 2% passbook savings account the answer was generally “of course not!”

Sentiment has its place but not when it comes to investments.

There is a credit card scam going around where an email indicates that the writer is with the VA prescription drug group. This scam is phishing for credit card numbers. There is no such VA effort taking place. The VA hopes to get a press release out about this scam this afternoon.