With the moving season upon us, military homeowners caught in the sour housing market have been asking me for advice.
Do you sell your house, knowing that it's worth less than what you owe? Leave your family behind, hoping that expanded benefits under the Homeowners Assistance Program will come through? Or do neither, and put your house up for rent?
As of this writing, defense officials still had not issued their guidance for implementing a law that provides relief for some military homeowners. The new provision, part of the American Recovery and Reinvestment Act that took effect Feb. 17, expands the Homeowners Assistance Program beyond its current mission of helping military and civilian homeowners relocating because of base realignment and closure actions.
Congress appropriated $555 million for the program, but the consensus is that won't be enough to help all the people the law was designed to help. They include relocating surviving spouses of those who died in the line of duty after Sept. 11, 2001; wounded warriors relocating for medical treatment or retirement; those forced to move because of 2005 BRAC actions; and those forced to sell homes because of permanent change-of-station orders.
Most of the debate within the Defense Department has focused on how to help service members affected by PCS moves. The law limits aid to those who bought homes before July 1, 2006, but sources say defense officials may impose further restrictions on assistance for PCS-affected service members because of money constraints.
They all agree on several points:
If you might qualify for the program, apply. Visit http://hap.usace.army.mil/">http://hap.usace.army.mil.
Consider all your options. "Operate as if you're not going to be covered. ... You have to take steps to limit your losses," advised a defense official familiar with the law, who spoke on condition of anonymity.
"Don't underestimate the ability to continue to negotiate with the lender," the source said.
He also suggested trying to extend your tour at your current installation. "Maybe ... you will be able to find a buyer," he said.
Get expert help. Go to your legal assistance office on base, which should be able to refer you to sources of help.
Remember that the law offers no tax breaks. You'll have to pay taxes on any assistance that is unrelated to a decline in fair market value resulting from a BRAC announcement.
If you can't sell your house, consider renting it. Affected service members should "continue renting their house as long as they can," said Deb Wilson, a real estate agent with Long Realty in Tucson, Ariz., whose husband retired from the Air Force in 1992.
Often, the rent received will not cover the mortgage payment. If the financial burden becomes too great, she said, "start the short-sale process to beat foreclosure."
A short sale involves negotiating with your financial institution for a sale involving less than what is owed on the mortgage.
Although the new law states that the property must be the primary residence of the owner, Defense Department sources said the consensus is that renting one's home will not affect the service member's eligibility or his benefits. As long as the service member was the owner/occupant of the house at the time PCS orders were received, renting the house should not affect eligibility.
But just in case the coming Defense Department guidance specifies that the house must be sold by a certain date in order for you to qualify for help, you might want to include a provision in the lease to protect yourself in case you need to sell the house before the lease is up. Sources said it is likely that service members who have moved already will be required to document that they tried to sell their homes.
The law is retroactive, so benefits may apply to some who already have had to make tough decisions about their homes. But it is not clear whether defense officials will help those who already have been through bankruptcies and foreclosures.