Homeowners Assistance Program per Military Times Newspaper
Sep 29 2009
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.
Here is a link to the federal register where you can read the actual language.
http://www.federalregister.gov/OFRUpload/OFRData/2009-23418_PI.pdf
While this is progress, it still leaves a ton of folks out in the cold. For instance:
The Jul 1, 2006 purchase date is arbitrary and appears to be the biggest sticking point for most folks. This will knock a lot of folks who were legitimately hit by the housing market collapse unfairly.
It does appear that the tax issue will be resolved downstream which is a very good thing, but when working through the various percentages that apply, there are scenarios whereby the beneficiaries will still absorb significant losses.
The elimination of those who purchased over the conforming limit for their area is a bit confounding and arbitrary as well. We ask our service members to PCS to very high cost areas where home prices are very high. In some cases, such as the DC / NOVA area, folks will pay a premium to live closer to the Pentagon to minimize the commute due to long / uncertain hours, and balance their family life. The notion that HAP is simply bailing out “million dollar homes” is a very shallow approach to the very complex issues facing folks assigned to these areas. And of course base housing is rarely an option in these cases.
Eventually, our elected officials and DOD need to come to grip with the simple fact that our military members are in unique circumstances. PCSing is a condition of employment and a legitimate cost of employment. More long term solutions need to be considered.
Joe Gladden
Not a moment too soon. A huge relief to thousands of families.
Joe Gladden’s post is right on the money (or lack of it). How tough would it be for DOD to simply state that no military member should lose more than 10% off the purchase price when they are forced to PCS? Why does the DOD think it is necessary to eliminate so many applications when congress has given them a ton of money? Folks, the DOD does not want HAP to become a multi-year, multi-billion dollar program that possibly saps money away from other defense operating budgets.
For those of you who will qualify, I’m glad that you may get some benefit. The reimbursement drop from 95% to 90% or 75% is quite a body blow and again is designed to keep the DOD from having to ask for more funds in the future. Personally, it seems I will get nothing for a 70k loss, but we are in relatively good shape finacially. My concern really lies with those families who are asked to sacrifice over and over, who are promised a helping hand, and get little to nothing. Bless you all…
Well, it looks like we are out of luck with the July 2006 cutoff along with most people who own homes near Eglin AFB FL.
Also, we found out this week that we were not able to refinance under the new 125% LTV program because our home is in FL. USAA denied our request for a short sale because we were not delinquent on payments. We just lost the buyers for our home. We have gone through every possibility since March with no success. Now what?? Rent for $1200 less than our mortgage and live on credit cards or give the keys back to the bank? We are very sad that it has come to this. I definitely never want to buy another home again.
I’m so fustrated with this HAP process. It’s mind boggling how the gov’t can bail out banks and offer the cash for clunkers program all tax free but cannot help service members who are forced to transfer. Even after recieving benefits, based on the 90% ratio, I will still be in the hole $20,000. That is alot of money to ask service members to “come up with” at closing. On top of that we need to have the money for the taxes!!! Alright off of my soap box and onto the questions!
1. Is the money you are losing on the sale of your home tax deductible? That could potentially help offset the financial loss. What portion of the HAP is taxable?
2. If I owe paid $169,000 for my house and I sell it for $150,000 (90% is about $151,000) what portion of my benefits is tax deductible?
Good luck everyone!
My guess is that most folks have found their way to the HAP Homepage, but if not, here it is. And it does provide information, but you may not like it.
http://hap.usace.army.mil/EP_PCS.html
I cut / paste the basic qualifications for a PCS HAP for convenience. Please note #3. This may seem insignificant, UNLESS you fall into the category of writing your contract before July1, 2006, with a settlement after July 1, 2006. My guess is that you will have to prove the contract ratification date. If you can’t find it in your files, you may want to call your Realtor or Realtor’s broker. They are usually required to keep all the paperwork for at least 3 years, and since that date has come and gone, you may want to check into it quickly. If they don’t have it you can call your settlement company. Most of them will should be able to access it in the archives. What is missing from this site are examples of the math.
While we are still hearing that the “tax issue” is being worked by the Ways and Means committee, at this point amounts covered by the government are still taxable…go figure!
1. Permanent reassignment requires move of more than 50 miles.
2. Reassignment ordered between 1 February 2006 and 30 September 2012.
3. Property purchased (or contract to purchase signed) before 1 July 2006.
4. Property was the primary residence of the owner
Joe’s note: This implies that you even if your home is now a rental but otherwise qualifies, it should be eligible.
5. Owner has not previously received these benefit payments.
6. If you are a member of the Armed Forces who is PCSing or has PCSed, download the application packet and complete the application. Carefully read all instructions, and mail your completed application to the USACE district responsible for the area in which your home is. Once DoD implementing guidance is received the district will contact you concerning your eligibility and benefits.
I hope this helps and I would appreciate any feedback from anyone who has actually completed the process. Likewise, if anyone has any insight on how DOD will handle the clearance issues for folks whose credit is impacted from all this, it would be helpful so that I can pass it on as we get tons of questions on this.
Joe
Here’s some unfortunate news that clarifies the HAP benefits: the benefit percentage is applied to the PFMV of your home. For example, you paid $200,000 for your house; 90 percent = $180,000. You sell the house for $150,000. Your benefit = $30,000.
Many of us were under the impression the math would work this way:
Paid $200,000
Sold $150,000
Lost $ 50,000
multiply by 90 percent = $45,000 benefit, for total loss of $5,000.
Nope, your total loss is $20,000, because it’s calculated as in the first example.