On or about July 20th Army Corps took down the Homeowner’s Assistance Plan website. They brought it back up quite a few days later with all information on the “Expanded HAP” removed. Everything there is now original HAP for BRAC information. This doesn’t mean you can’t still apply for the 2009 ARRA version. The application is still posted. The application itself is up for public comment on the Federal Register until August 18th. HAP homepage states they are not able to release any information on the expanded program until the rules are finalized and published in the Federal Register. Keep watching the page as information will come up there first- HAP site

NOTE ON STATUS: According to a call to Office of Secretary of Defense (OSD) today- the rule publishing holdup is “to tax or not to tax” the Service Member on the benefit paid towards sale of property. Two issues being debated by the “DOD Tax Council” are: 1) Withholding if benefit is taxable, and 2) Making benefit “tax exempt”. Both options require agreement and coordination with IRS and Treasury Department. As last published information indicates...taxes would be assessed on benefits including; reimbursements for costs while awaiting application processing, mortgage shortfalls, standard closing costs for area and realtor fees to name a few. As anyone who knows anything about real estate and taxes knows- this could easily create substantial and unbearable tax consequences for the Service Member. This would render the program ineffective as an option for most members. For example: Most qualified applicants in the San Diego area bought in 2004-2005. They have mortgage and closing cost total shortfalls of $100,000-$300,000, if they 100% financed on an interest only loan. Add that benefit amount by W-2 to current income and bet you jump a few tax brackets. According to most recent USMC briefs to base financial planners- Army Corps would withhold amount they think you will owe and send it to IRS. Thus you must still have cash to close, negotiate unsecured loan, or obtain debt forgiveness on that amount from the lender. It would make more sense from a tax standpoint to press for short sale approval from lender if you fall under debt cancellation rules with the Mortgage Relief Act of 2007 (consult your tax advisor). This should not be the case. This military benefit should parallel current tax laws available to others for debt relief. If tax consequences are not changed- only true benefit to HAP against short sale is better preservation of credit records which hopefully protects your security clearance. Good news is…somebody actually noticed this disparity and sounds like they are trying to deal with it! Negative side- it is taking them a while to agree on what to do.

As well, $555 million is just not enough money based on response to run the program anywhere close to 2012. There are over 3,800 applicants currently. Much like “Cash for Clunkers”, some folks in Congress and their advisors did not do enough homework on the response and costs that would be generated by the program. Thus, they need to come up with more funds or limit benefits. Sources state this requires a “Legislative fix”. Senate has 2 bills upcoming: 1) S1407 the FY2010 Military Construction and Appropriations Act, and 2) S1390 Defense Authorization Bill. Each of these contains provisions for more HAP dollars. Not sure how long it will take to get these approved. Good news is- much of the initial money is already in Army Corps/DOD bank accounts ready to start paying on the program once the tax issue is resolved and rules are published. You can see the money is in the accounts on the DOD and Army Corps links through ARRA 2009 Hopefully Congress will return from their August break and take the action needed to clear up the funding issue.

As many of the summer movers are in tough spots running two households right now…hopefully they will resolve the issues and begin processing soon. They are not alone, as this mortgage shortfall issue started long before this summer. Army Corps can still only advise applicants to do what they believe they must for their own best interest in the meantime.

What can you do to help? Attend “Town Hall” meetings and bring it up. Send letters and emails to your respective Congress members letting them know this is important to you. Mention the bill numbers and the HAP being a primary concern. If you are a Service Member not qualified for the benefit, support your fellow members by sending in letters. Post here any information you find that may be helpful to others.

The more I think I understand this program, the further confused I get. Can anyone offer any help/guidance or experience. I know that it is new but my problem is we have an offer the home is going for less than what we owe. We can do a short sale because we are not behind or facing foreclosure but we don't have the money to bring to the table what do we do

You can put your application in to the ACOE and maybe get the "buyers" to rent the house until the HAP comes into play.

This message has been edited. Last edited by: FlynnPatrick,

Wifey- many folks in the same situation. Most do as Flyn suggested. Put house on the market because HAP tells you to with appication. Find buyers but can't close cause HAP isn't ready. See if they will rent.

If you are a buyer who is thinking about renting while waiting for HAP approval you need to consider the following:

1) Does your offer to purchase acknowledge that the home is subject to a potential short sale, notwisthstanding HAP dollars that may (or may not) come?

2) What is the seller's ability to pay the mortgage after you move in as a renter?

3) If HAP dollars don't come are you willing to spend money on home inspections, radon inspections, etc prior to lender approval of a short sale?

4) If HAP dollars don't come through, a short sale is disapproved, and the seller (landlord) stops making payments, are you prepared to move again?

MK,

Many lenders are now offering to transfer your debt into a note which must be paid, typically over a period of years depending upon on the amount you are selling short.

It's a standard part of short sale negotiating that your Realtor should be knowledgeable about.

Thank you all for your advice. I think we will likely go with the ask the buyer to rent or lease until the HAP benefits come through.

Edgykatid - what department do I talk to about the debt transfer thing. My lender frustrates me because they don't want to listen only want to sell you their products (with out saying the name I am sure many of you know who I am talking about) At any rate the Short ssale dept. wont even entertain us because we are not late/behind or facing foreclosure.

Does anyone know any of the specifics of what the HAP program will actually offer. We submitted our application in early spring and since then things have been put up and taken down on the website and at this point I am not sure what the program is offering

MK,

You won't be able to do this with a phone call.

If you are listed for sale with an agent they can walk you through the steps necessary to do what is needed.

Banks won't talk to you at all until they have a ratified contract in their hand.

This is all done in writing.

SO here is another question. If you do a short sale, it will adversely effect your credit score and rating. This would therefore jeopardize security clearance right?

Also I guess by technical terms what we are doing is a short sell but my agent has not done any paperwork for a short sale.

Also does any one know how HAP will disseminate the money. Will they be at the closing with you or will they send funds for closing or will it take place after the fact...

Can't answer your HAP question. It isn't funded so it is all talk at this point.

Most people who sell short have also missed payments. A short sale with missed payments has almost the same effect as a foreclosure does on your credit score. Could you lose your clearance? Good question for your command security officer.

If you haven't missed payments the result could be different.

I want to encourage you to talk to your Realtor about this, and if he or she doesn't know the answer then get the broker involved.

edgykatid, HAP is funded it has been since February, the ACOE just hasn't published the rules yet.

As of today per call to OSD-rules are still on hold due to “to tax or not to tax” issues. There is nearly daily dialogue between DOD Tax Counsel, IRS legal, and Treasury Dept.

Edgy- good gouge on the rental situation. Additionally, agents will also need to consult their corporate legal counsel. Let’s be honest. Agents who really know what to do with Expanded HAP clients are rare and will continue to be rare because of the volume of information needed to do it properly. The information is like an organism at the moment- ever changing. Unless they are prior service, most agents don’t know the military system and entitlements. They can give you information as it pertains to general real estate principles for your area. However, in any case, agents are supposed to tell you to seek legal and tax advice for your specific situation. I know, nobody likes to visit the attorney and accountant. Convince yourself they are friend not foe!

Security Clearance concerns- Per call to Personnel Readiness (PNR)…Each service has a different policy on how a short sale or foreclosure will affect clearance. The VERY BEST (yes, I am yelling) thing anyone can do is to go fearlessly to base legal and request assistance. You have attorney client privilege when you do this. You should consult base legal for potential to use HAP (to wait or not to wait?), short sale, foreclosure, or negotiating a possible loan for shortfall. Don’t make a move without them or you will likely have more challenges later. Acting proactively is likely to help you and lessen the negative affect to clearance. Keep a notebook of all communication (with dates and names) to support your actions. Every situation is judged case by case by actual circumstances leading to the financial challenge.

MK- USMC Head of Legal Assistance states substantial training has been going out to Base Legal/Judge Advocates (can’t account for other services). Legal constantly receives updated information. It is free…they’re ready to help…don’t wait…make an appointment! Take your agent with you if they will let you...

quote:

Security Clearance concerns- Per call to Personnel Readiness (PNR)…Each service has a different policy on how a short sale or foreclosure will affect clearance. The VERY BEST (yes, I am yelling) thing anyone can do is to go fearlessly to base legal and request assistance. You have attorney client privilege when you do this. You should consult base legal for potential to use HAP (to wait or not to wait?), short sale, foreclosure, or negotiating a possible loan for shortfall. Don’t make a move without them or you will likely have more challenges later. Acting proactively is likely to help you and lessen the negative affect to clearance. Keep a notebook of all communication (with dates and names) to support your actions. Every situation is judged case by case by actual circumstances leading to the financial challenge.

Some good stuff there, but especially for CG members, a couple of things to point out.

A) Legal has nothing to do with clearances and likely knows very little about the process.

B) In anything and everything that could affect you clearance, it is not only a good idea for YOU to bring it up first, in almost every circumstances, it is mandatory for you to report it!

C) I'll reinforce the every case is different. If you follow above advice and this is the only 'questionable' item in your security file, likely not to much need to be concerned. If it is the upteenth little thing, well it may have an effect. If the Security Center finds out about it from some source other than YOU, well then there is a character issue on top of this issue.

This is such an awesome forum and I am happy to participate. Finally some people who have a little compassion and are willing to share their knowledge and expertise.

I myself am an Accountant (Tax) and honestly I have no clue as to how this will effect even my own personal life. Mostly because the information has not really been disclosed. But as soon as I filter through some things I will be more than willing to help provide any info I can.

HAP, HAP, HAP, In all things I am still trying to be patient. My husband and I have been dealing with this since January and submitted our Application in March. Whew...I've been patient this long.

I will pass the Security info to my husband. It is not an issue but we are just trying to thing proactively and dot as many "I" now.

Flynn,

I showed a "HAP" house in April to some buyer clients who are settling tomorrow on something else. They'd still be waiting to close if they wrote an offer on that house.

It is very difficult for any Realtor to encourage a buyer to jump on a HAP assistance property when funding, rules, etc, are in the air. How can a buyer put faith that the rules will apply to their seller?

The best coverage is twofold;

- Bringing the house to market structured as a short sale. The process is now well worn and understood by most agents.

- Marketing the possibility of HAP assistance in conjunction with short sale marketing.

Sellers need to be covered both ways.

Edgy is correct…running HAP in conjunction with short sale when Seller may qualify for both is highly recommended. If finances are dwindling rapidly, one may not have time to wait for HAP. Short sales take time too. If rules for HAP come out and you qualify before short sale goes through then you have both options.

Like everything else- the ability to rent the house to a buyer who is willing to wait for HAP has a lot to do with demand. In San Diego, it has not been too difficult to find someone willing. One condo had 2 competitive offers- well qualified, bidding over list price and willing to wait. That seller is not qualified to go short sale, as is relatively financially stable and not behind in payments. A single family house had 8 competitive offers, bid over list price, and 2 of the buyers were qualified and willing to rent until HAP goes. This one could go short sale (divorce hardship), but the Seller can keep going and doesn’t want to ruin credit or risk security clearance issues. Their Buyers all know there is no guarantee on the timeline. These houses were priced for market and to assure appraisals would match. Not sure they will appraise at the overbid price but we will see when the time finally comes and Hap is ready to process. The overbidding is primarily because there is a shortage of inventory in our area. Thus people are willing to wait for the nice ones. A third nice condo got 2 offers. We sent it through for short sale as Sellers are in horrible financial straits. Currently in 2nd appeal with Bank of America. No chance to wait for HAP unless it goes NOW.

On the other hand, I know some people with a HAP property in Montgomery, Alabama. They have been on the market 9 months. Three agents and several price reductions later they finally got 2 low offers in the last month. Neither Buyer was willing to rent or wait for HAP. Too many other homes right up the street and they can close now. Big Bummer.

With regard to the "to tax or not to tax" issue. Doesn't the Mortgage Forgiveness Debt Relief Act offer protection from the potential of HAP benefits becoming taxable?

http://www.irs.gov/individuals...d%3D179414%2C00.html

Unfortunately, the answer to that is "No" according to DOD. It doesn't fall under the Mortgage Forgiveness Debt Relief Act (MFDRA). Reason in simple terms, based on the way the American Recovery and Relief Act (ARRA Feb 2009) legislation is currently worded, the money paid on Service Member behalf is treated as "income" to the Service Member- thus doesn't qualify as "debt relief". The monies owed to the lender are actually paid by the 3rd party/Government on member behalf like a "benefit", so they are not truly "relieved"/forgiven as defined in the MFDRA. Almost any time an employer gives a "benefit" to an employee the IRS has a rule that makes it taxable.

DOD representatives are working with IRS and Treasury Dept to get the wording modified and sent up the chain for approval so that HAP monies would be treated pretty much like $$ forgiven under MFDRA. I called OSD on Friday and was told that the Ways and Means Committee is working on the needed legislation. Once introduced, there have to be enough Senators and Representatives who agree it should be that way to pass. Unfortunately, legislation is going to take more time and little happens while Congress is on break. That is what is taking so long to get rules out according to OSD.

All- this came out yesterday in the Airforcetimes.com
The House Ways and Means Committee unveiled a bipartisan military homeownership tax bill Thursday with provisions aimed at helping people buy or sell a home in a down market.

Committee aides said the bill, a collection of several tax-related initiatives for service members and their families, is on a fast track for consideration by the House of Representatives. It could pass the House in two weeks, aides said.

Among the key provisions of the Servicemembers Home Ownership Act of 2009:
* Homeowners Assistance Program payments from the Defense Department, for certain service members forced to sell a home at depressed prices, would be exempt from taxes. The tax status of the payments are one major reason why the Defense Department has not yet made any payments of a benefit that is expected to cover about 10,000 people who bought a home before July 1, 2006, and who are either wounded service members or who are permanently reassigned to a new duty station. About 4,000 people have applied for the help, even though the Pentagon has yet to publish rules for how payments will be made.

* Service members and some federal workers who received an $8,000 first-time homebuyer tax credit for the purchase of a home before Dec. 1, 2009, would not have to repay the credit if they sell the home after less than three years or stop using it as their primary residence. Military personnel, Foreign Service officers and members of the intelligence community who are forced to sell their homes because of government orders would be exempt from repayment.

* The $8,000 tax credit would be extended beyond Dec. 1 for service members, Foreign Service officers and members of the intelligence community who have been deployed outside the U.S. for 90 days or longer between Jan. 1 of this year and the Dec. 1, 2009, expiration date. The extension is recognition that they may have been unable to purchase a home because of government service. Income limits still would apply, phasing out the credit for single taxpayers with adjusted gross income of $75,000 or more and couples filing joint returns with adjusted gross income of $150,000 or more.

Ways and Means Committee chairman Rep. Charles Rangel, D-N.Y., chief sponsor of the bill, said in a statement that the measure is intended to ensure that service members are “able to take full advantage of the programs we enact.”

“This bill will improve how certain provisions under the Recovery Act apply to America’s service members, and I hope it will see swift passage in the House and Senate so it can get to the president’s desk as soon as possible,” Rangel said.

FURTHER ARTICLE SAID-
Thursday, September 17, 2009
Rangel Introduces Bipartisan Bill to Help Service Members Take Full Advantage of Homebuyer Incentive

WASHINGTON, D.C. - Ways and Means Committee Chairman Charles B. Rangel (D-NY), with 28 additional original cosponsors, today introduced H.R. 3590, the Service Members Home Ownership Tax Act of 2009, which would make certain changes to the tax code with respect to provisions included in the Recovery Act to improve how those provisions apply to service members (i.e., members of the uniformed services, members of the Foreign Service, and intelligence employees).

“America’s service members devote their lives to our national security,” said Chairman Charles B. Rangel (D-NY). “Congress should do everything we can to ensure that service members are able to take full advantage of the programs we enact. This bill will improve how certain provisions under the Recovery Act apply to America’s service members and I hope it will see swift passage in the House and Senate so it can get to the President’s desk as soon as possible.”

Everyone should send Congressman Charles B. Rangel a thank you