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“Military members have option when housing crisis hits
TOM PHILPOTT; CONTRIBUTING WRITER
Last updated: May 29th, 2010 12:20 AM (PDT)
Like thousands of American homeowners, John and Susan, a Coast Guard couple, were slammed financially by the real estate crisis.
They saw the value of the $150,000 house they bought in Texas in March 2006 plummet, starting in 2007. This month they will sell it for $125,000, well below the $138,000 they still owe on their mortgage.
John and Susan can’t wait around until the housing market recovers. The Coast Guard ordered them to Texas four years ago; both must report next month to new East Coast assignments.
John and Susan are resigned to the fact that equity in their home has disappeared – including $12,000 spent to reduce their mortgage and another $9,000 in permanent upgrades to their home.
But the final insult is the prospect of having to pay their mortgage company at settlement an additional $13,000 – the difference between what they still owe on that mortgage and what the buyer will pay.
John and Susan thought for a time that they would need to take out a separate settlement loan as other victims of the housing market collapse have. But then they read a command advisory on how Congress last year expanded the decades-old military Homeowners Assistance Program, or HAP.
The government, it turns out, will pay that $13,000 difference for John and Susan, and already has paid a whole lot more to other military homeowners who found themselves in more distressed circumstances.
HAP has existed since 1960s to help military and federal civilian families who see the value of their homes fall following announcements that military bases were closing. But last year Congress expanded the program dramatically to help new categories of military homeowners. These include:
• Military personnel and civilian employees of the Department of Defense or the Coast Guard who have suffered wounds, injuries or illnesses during deployments since Sept. 11, 2001, leaving them at least 30 percent disabled and requiring location transfer to get medical care or to retire.
• Surviving spouses of service members killed in the line of duty, or in the performance of duties during deployment on or after Sept. 11, 2001.
• Military personnel and civilian employees impacted by the 2005 BRAC (base realignment and closure) round because they bought their homes before May 13, 2005, and must sell on or before Sept. 30, 2012.
• Military members who bought homes before July 1, 2006, and have been, or will be, reassigned between Feb. 1, 2006, and Sept. 30, 2010.
John and Susan, who asked that their real names be withheld, fall into this latter category. Next month, their HAP caseworker will be there at housing settlement with a check for $138,000 to pay off their mortgage. The new owner immediately will buy the house from the government for the agreed price of roughly $125,000. Thus John and Susan will escape their burdensome mortgage with a timely $13,000 assist from Uncle Sam.
“I think it’s great,” John said. “I know all about the government’s budget problems and how it’s blowing all this money on bailouts and other programs. But I feel this is a good one – for obvious reasons.”
Joe Sikes, director of housing for the Office of the Secretary of Defense, said that so far 1,360 military homeowners have been helped by the expanded HAP program. John and Susan’s predicament is modest compared with that of many military homeowners caught up in the real estate crisis. The average HAP benefit is $120,000, nearly double the original estimate.
Congress initially set aside $555 million for the program. The money and expanded authority to use it were part of the economic stimulus act of February 2009. Lawmakers added another $300 million to HAP funding this year.
That money, said Sikes, likely will be spent or obligated by Sept. 30 as HAP works through a backlog of claims filed by several thousand service members eligible to apply retroactively for expanded HAP assistance.
While full details are available online at HAP’s website – hap.usace.army.mil – Sikes explained that HAP can be used in a couple of ways. John and Susan’s circumstance, with “upside down” mortgage value, is typical, Sikes said.
But a second way HAP can be used is to protect most of the accumulated equity in a home for longer-term military homeowners or for those who put a lot of money down when they bought their last home if they did so before July 1, 2006. In these cases, HAP will pay up to 90 percent of the purchase price plus closing costs.”
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