Military Families-Options if You Are Upside Down on Your Mortgage
By Cindy Jones on January 8th, 2010In the Northern Virginia real estate market where prices have declined military families with PCS orders face a difficult decision. Do you hold on to your home and rent hoping for prices to rebound in another 3-5 years or attempt a short sale and hope that your lender will consider PCS orders a “hardship?”
There are two other options that may be available for you to consider as weill. Military families stationed at Fort Belvoir, the Pentagon, Quantico and other Military District of Washington installations who purchased a home prior to July 1, 2006 may find that Homeowner Assistance Program (HAP) may offer some relief if you have upcoming PCS orders to move.
The HAP program is aimed towards helping:
Active Duty Military Personnel with PCS orders who are upside down on their mortgage
Wounded soldiers who must relocate due to medical conditions (wounded after 9/1/2001)
Surviving Spouses (death of military member after 9/1/2001)
If you live in Northern Virginia and you are anticipating PCS orders in 2010 and you qualify for HAP, now is the time to start gathering your documents and call the HAP Field Office for our area (located in Savannah) at 800-861-8144 for additional information.
Download information on how to apply for the HAP program.
If you have a VA Loan you may be eligible for a VA Compromise Sale. In our region of Northern Virginia the VA Regional Office which will provide you with the latest updates is the Roanoke office. The VA Compromise sale does have several factors that are important to remember:
• The property must be sold for fair market value.
• The closing costs must be reasonable and customary
• The compromise sale must be less costly for the Government than foreclosure
• There must be a financial hardship on the part of the seller
• On loans that originated on or before December 31, 1989, the seller must be willing to sign a promissory note
• There must be no second liens or other liens (unless the amount is insignificant).
• The seller must first obtain a sales contract in order to be considered for the program.
To protect the seller’s interest, the seller should make the sales contract contingent and/or subject to the approval of a VA compromise sale.
VA Compromise Sale Information Packet
There is an extensive list of VA approved list of Loss Mitigation Servicers available on the VA site. A VA Compromise sale does require that the VA approve the HUD-1 be reviewed and approved by the VA prior to settlement so making sure the buyers documents are in order at least 48 hours in advance is a must.
If you are stationed at Fort Belvoir, the Pentagon, Quantico or any of the Military District of Washington installations give me a call at 703-346-2213. I’ve closed HAP deals under the new guidelines and understand the process well.
Hello and thank goodness for your website! I tried to call the HAP today, no answer or not open message. Went to Bolling AFB Housing office, the assistant knew a little more info than I did, gave me a power point printout.
According to Zillow.com, the home I purchased in Triangle,VA (Prince Wlm county)Apr 2006 is now worth over $150K less today. I was told to be considered for HAP that it one’s home must be > 10% less AND the housing market in the city, county, some area must also be > 10% less now from when the home was purchased.
What is the formula?
Thank you for any help
Carl,
I have settled five HAP transactions so far and have two more under contract.
There is little doubt that your home meets criteria required by HAP for decrease in value. The real number will come from a CMA to show you the exact values in your neighborhood but so far between Fairfax County, Prince William County and Stafford there haven’t been any issues in regards to value.
If you need assistance please feel free to give me a call.
I will also drop you an email as well.
My husband and I have made an offer on a HAP house. It was accepted a month ago and we are being told it could take up to 6 months to complete the sale. The owner (pcs sale) wants to go government purchase. We are also on pcs orders. Do you have any ideas of time lines for this type of sale. St. Mary’s county Maryland.
Thank you.
Susan-I dropped you an email but to follow up with your comment. The process was longer before the program was fully approved. Since the program was approved and funded HAP recommends that contracts reflect a 60 day close. The internal process once all of the paperwork is received is to go through their internal appraisal review and then goes to the benefits department. Once in benefits the files are processed based on order out dates. My last closed sale we accepted an offer in mid-November, the owners had a PCS date of mid-December and the closing occured in late January. The real estate specialist handling the sellers file can let them know where they are in the que.
DOES THIS APPLY TO NC AS WELL? MY HUSBAND AND I HAVE TO MOVE TO FLORIDA AND CANNOT SALE OUR HOUSE BECAUSE IT HAS DROPPED IN VALUE AS MUCH AS OR MORE THAN 150K SINCE WE BOUGHT IT IN 2003. WE COULD NOT POSSIBLY EVEN RENT IT FOR THE MORTGAGE AND FEEL TRAPPED. WE HAVE EXCELLENT CREDIT AND REFINANCING IS NOT AN OPTION BECAUSE OUR LOAN TO VALUE EXCEEDS THE 80% THAT NFCU REQUIRES. WE CANNOT AFFORD TO SALE IT AND TAKE SUCH A BIG LOSS.
If you are an active duty military family it doesn’t matter where you live to qualify for HAP as long as your home has decreased at least 10% in value AND you meet the other guidelines. Check out the HAP website to make sure you meet the qualifications and if you do then by all means follow the application procedures.
Good luck.
I was told if you are purchasing a HAP home you can rent it out until the sale is final. What I don’t understand is sometimes everyone comes out on top except the seller. The realestate agent and the buyer of the house come on top with a loss to the seller.
Clevland-having the property rented is also good for the seller. I had four of my early HAP deals set up with pre-occupancy agreements which helped the sellers cover some of the expenses of carrying the cost of their home while already out of the area.
Not entireley true. I am stationed in California and over $200,000 upside down. I was turned down for HAP because the original cost of my property is greter than $729,000. I pay my mortgage evry month and I am now forced to short sell or foreclose.
Kim-the program does have upper value limits which is stated on the HAP website. I’ve had a few calls from families in our area and one of the first questions I ask is what was the original purchase price of your home? If they say a number over $729,000 then I let them know they aren’t eligible for the program and we need to explore other options.
Do I qualify for HAP? I purchased my home in July 1997 for $217,000, have a 1st Mortgage of 450,000 and a 2nd of 80,000 and its current assessed value is 467,00. I live in Woodbridge, VA (Prince William County)
Sarah,
The answer based on the information about your mortgage appears to be no. Here is why. HAP benefits cover the original loan on the property. Unless you can show that the additional funds you took out beyond the $217,000 were for improvements to your home then you would not qualify. HAP does not cover loans that were taken out when the values of properties skyrocketed and homeowners removed their equity for other purchases. There are other criteria if you are Active Duty Military or qualify under the HAP DNRP for civilians to consider but just based on the little information you provided I don’t think you would qualify. That answer might change with more information.
[...] military family in Northern Virginia is making a move and using Department of Defense HAP benefits to assist [...]
what other options are available to retired vets who are over the 729000 threshold?
Ted-HAP is only available for those who have a mandatory retirement between the dates outlined for HAP benefits. If you meet those requirements then you would need to apply for an exception directly with HAP to determine whether they would waive the top price limit currently in place.
Cindy –
My husband and I just found out we are going PCS to NE in Dec. I have read many websites and continue to get conflicting information. Also, I can not find a real estate familar with this HAP program. We purchased our home in March 2008. Now we must sell for a slight loss and pay about $20,000 out of our own pocket. With this information would you be able to tell me whether or not we qualify for the HAP program? Thank you in advance for any advice. Sincerely. Nancy
HAP benefits currently state that you must have bought your home or been under contract to purchase your home prior to July 1, 2006. Since you bought your home in 2008 you would not qualify for HAP under the current guidelines. You can talk to your lender directly to see if they would provide any options for you to sell as a short sale without being late on your payments. Some lender do understand the PCS orders are a hardship. Most of the HAP sellers I am assisting in Northern Virgina are upside down on their homes in 6 figure numbers.
Cindy – Thank you so much for your quick response and helpful advice. Even though it doesn’t take the sting of our financial loss away, seeing the 6 figure number losses in your area, we realize we good be much worse off.
We made an offer on a HAP home and it was accepted, but our offer (and thus, our contract) amount is considerably higher than what anyone expects the home to appraise for. Our realtor says that means we’ll be renegotiating the contract once the appraisal comes in, and that we’ll end up paying less — perhaps more than $20,000 less — than we offered. Does this make sense to you? We, of course, won’t want to pay our full offer price if the appraisal does come in significantly lower, and I doubt our bank would approve our loan for a house that has appraised low. We offered as high as we did to outbid another couple. But we’re really wondering how this will shake out. If the appraisal is indeed low, should we, in fact, expect to renegotiate to our benefit?
Jane-your agent has to be the one to advise you, as it appears they have, on how to deal with a low appraisal. Your contract will dictate yours and the sellers obligation under the appraisal contingency (if there is one) on your offer.
I live near Fort Lee in Prince George, Virginia. I’m active duty military. We purchased in 2008 for 218,000 and refinanced in 09 for a lower interest rate. We are upside down about 28,000. I retire in a year and we need to relocate for family reasons. The house needs about 15,000 in landscaping and interior work which we don’t have. Would any of these programs help in getting us in a position to sell? The base is undergoing some expansion. Not sure if that will help the market here.
Joe-unfortunately based on the date you purchased you are not qualified for the DoD HAP program. Do you have a VA mortgage? If so you may be qualified for a VA Compromise Sale. You should also contact your lender to discuss if they have any direct options for you. HUD recently announced a new Short Refinance program which if your lender decides to participate in might be an option for you. Good luck.
Cindy,
I was so hopeful when I first heard of the HAP program. My husband was stationed at Andrews AFB in June 2006. We purchased our home in August 2006, though we had made an offer in June or July — just not under contract by that date. Are we definitely not qualified for HAP? Missed by a few weeks? Is there anything we can do, or is the July 1 date set in stone?
Also looking at VA Compromise Sale option, but not sure how to get more info. Hubby has some investments, and we have a college savings fund for our son, as well as hubby’s 401K retirement. If we get PCS orders this year (which I see in our near future), are we still eligible for this program? Is PCS enough of a hardship, or do they take into account your total of investments as stated above? Would that put us out of contention?
Final VA Compromise Sale question: what happens to the difference that the VA pays? Is the homeowner / seller responsible to repay the VA? Is it written off as a bad debt?
HELP!
Ms Jones,
I think that I qualify for this program, but I’m not 100% sure. I bought my home for $350K five years ago and saw the value soar and then plummet back down. My realator believes that the house is going to appraise for somewhere around $350K now and it seems that it just keeps going down as others in the neighborhood continue to drop their prices.
I am in the military and have already PCS’d to Monterey CA where I am at the Naval Post Graduate school. My wife is still back in Virginia in our house so we are having to maintain two residents now.
Our loan five years ago was a jumbo loan so it was split in two w/ $335K main loan and a $40K home improvement loan.
So are we eligible for this program?
Very respectfully,
LCDR Curt LaRose
Curt, Unfortunately the only ones who can give you a 100% assurance you are qualified for HAP will be the team in Savannah. I do have a couple of questions based on what you said. You indicate your purchase price was $350K and the current market value is $350K. If that is correct then the minimum 10% decline in value required by HAP might not be met. The second concern is that you have indicated loans over the purchase price. Your loans appear to total $375K. If you can show receipts that you did 25K in improvement in the property then you should be okay however otherwise the numbers don’t add up. Good luck and get in touch with the Savannah office of HAP to find out about the value of your property and your overage loan situation.
Hi Cindy-
HAP is having us gather all of our receipts for any home improvements we made to our home. We told them upfront that we used some of our home equity $ for home improvements, and the rest, a good portion was for educational expenses. If what you are saying is true, we would not qualify. So why are they making us go through this process if this is true? It seems like a waste of time on their part. Also, why doesn’t HAP put this information on their website? I think it would save military members a lot of time, and not get their hopes up if they did take out equity lines which exceed the home improvement amount.
Thank you-
Terri
This is how the official rule is written per the Federal Registry.
“(d) Eligible mortgage. A mortgage secured by the primary residence that was incurred to
acquire or improve the primary residence. For a mortgage refinancing the original mortgage(s)
or for a mortgage incurred subsequent to purchasing the property, funds from the refinanced or
subsequent mortgages must be traced to the purchase of the primary residence or have been used
to improve the primary residence. Funds from a refinanced or subsequent mortgage that were
used for other purposes are not eligible and may not be considered. For permanently reassigned
member of the Armed Forces, all payments on an eligible mortgage must be current as of the
report-not-later-than date.”
I don’t know how much you may have used for education loans. If you can cover those costs above and beyond the home improvements perhaps you can still go to settlement. The only ones who can give you the official answer is the team in Savannah. But most cash out refinances don’t qualify based on the rules.
Thank you Cindy. We have spent quite a bit of time gathering this information and have asked our team Savannah specialist this question several times to no avail….can’t get a straight answer. It is really frustrating because we are not only wasting their time, but ours as well. I don’t know why they took our application in the first place knowing the situation we are in….it’s crazy.
Thanks again for the information.
Cindy,
This website is what I’ve been searching for, for about 3 months! All of this information is great but I have a few questions and it is near impossible to get through to anyone at the HAP office, as I’m sure they are pretty busy.
We meet all of the criteria to qualify and I’ve got all the paperwork set up to send out but my main issue is that we must have the house on the market. We owe $260K and it’s worth roughly $160K. If we priced it at $160K (or around that) I have a feeling my tenant would want to buy (because it’s actually a great deal at that price). That would be great EXCEPT then all the paperwork I’ve just sent in requesting government acqusition will need to be resubmitted requesting repayment for money lost, AFTER the sale is finalized.
If my tenant is not interested, I am faced with two issues, the tenant being irritated by others viewing the home or the tenant giving notice and moving out leaving us with the full mortgage payment until we are approved. Affording the full payment is pretty impossible for us to do and we would end up behind within 1 month, causing credit scores to decline.
I hope my concerns make sense. This all seems like a whole lot of confusion, with little guidance.
Any advice??
Thank you for your time and such a great website!
Katie
Katie-I’m not sure why you would think you couldn’t sell your home to your tenant and still follow the government acquisition route. I’m not aware of anything that would prevent that from happening as long as you are selling the home at Fair Market Value. Of course the best way to know if the $160K price you think your home is worth is to have a local Realtor® provide you with a CMA.
I’ve had wonderful luck with tenants in my area cooperating with sellers as they understand the value of the HAP program. You have do have to follow the T&C’s in the lease agreement you have in place and the buyer may have to wait to move in until the tenant’s lease is up. It can be a win/win for everyone if handled correctly.
Hope that helps you a little bit.
We close on our built home by Nov 2007. We are dual military and now, my husband is retiring and I am deployed. If HAp is not an option, do you and other option.
If you are upside down and need to sell due to deployment & PCS orders you may have to consider a short sale. You should speak to your lender about your options and then to a local Realtor® who has short sale experience.
Hi Cindy, I’m not sure if we qualify for the program. We have a house that we bought in 2001 in Fl. We PCS’d in March of last year and the house has sat empty since. The value of the house went down about 30%. We have been paying on the house but we can’t continue to do so indefinitely. Would we still qualify?
Alexandra-at least from the basic information you have provided I would say you should apply for the program. Read the application information on the USACE website and if you meet everything outlined then you should take advantage of the program.
http://hap.usace.army.mil/EP_PCS.html
We purchased our home in Fl in May 2007. It has declined approx $140,000 in value. We opted to buy because there was no base housing available. We will now be PCSing and the BAH there will a significantly reduced amount. We can not afford to keep this house and live there. Is there any help for those of us with a conventional loan, who are current on payments, and have a Gov order to leave?? It seems pretty unfair that our credit will suffer if we have to short sell, due to a situation out of our control. It is confusing to me that HAP helps some in the military, but not all. Any suggestions??
Julie-DoD had to pick a date to work with and the 1 July 2006 or before for a home purchase is that date. Some lenders will allow a short sale without being late on your payments. It will depend on your lender & the insurer on your loan. I would suggest you contact your lender and talk with them. PCS orders are considered a hardship and I’ve sold a couple of homes for military families in similar situations. Best of luck.
Hi my husband and I bought in 2003, and are now over $175,000 upside down in this market. He is deployed now untill august or sept 2011, with PCS orders on the way shortly after that. Would we do the extended HAP process? And how soon should we get that started? Do we have to have the actual PCS orders to apply? Is there anyone to help me file the application, as I am not aware of all the verbiage and my husband as I said is deployed out. I do have Power of attorney, and obviously he is aware of our situation and I would never do anything he would not be agreeable with. With such a huge loss we could not afford to take this hit upon our move to new order destination. Our payments are all up to date, and we have excellent credit, we don’t want to wreck that but with having a new duty station on the way cannot afford the loss the market has taken either. Will we be elligable? What steps and how soon do I need to take action?
Candace I would recommend that you get in touch with the HAP regional office right away. Your husbands deployment orders from the area prior to Sept 30, 2010 may be sufficient for you to apply for benefits. You didn’t indicate whether you were in Northern Virginia or not. Here is the link http://hap.usace.army.mil/HowToApply.html to the map of the regional areas. At this time no official word on extension of benefits beyond the current cut-off date.
It sounds as if we are in the same predicament as many families that posted here, though we are in a different state. Bought a house in 2003, currently upside down, and PCS orders. From what I understand, the HAP and Expanded HAP has not been extended beyond September 30, 2010. Are there any other options besides a short sale or renting the property out? What are the future implications of having a short sale in your credit history?
Erin-at this point expanded HAP does not go beyond the September 30, 2010 date. Certainly I’m encouraging everyone to contact their Congressman and Senator regarding HR 237 and to let them know the impact on their lives due to the current restrictions based on dates associated with the HAP program.
Renting and short sale are at the moment the only two options. A short sale will impact your credit but your lender may process the short sale without any late payments which lessens the impact. I’d always recommend contacting your lender about your options as a back-up plan in case HAP does not expand.
My wife and I are part of the First Army move from Ft Gillem, GA to Rock Island, IL.
It’s so hard to talk with anyone from HAP or DNRP.
Is there an individual that we can pay that will look over out particular situation and tell us whats best?
For instance if DNRP will pay closing costs when we get an offer that asks for closing costs can we tell the offerer that we will increase the cost of the house and pay the closing costs then have DNRP repay us?
Can you e-mail me with your telephone number or e-mail address? We have some questions about the current status of hAP and are having a difficult time getting straight answers.
You seem as though you may have the valuable info we are looking for!
thanks so much!
lisa Morgan
The best folks to talk to about any specifics regarding your benefits will be the HAP team you are assigned to. If you are in GA that would be the team in Savannah. The other option is if you have been assigned an agent through relocation they should have additional details for you as well.
Charlie,
I did one DNRP where we negotiated the second as short sale and the first was covered by DNRP benefits. I don’t know if that would apply to your situation or not.
Lisa,
I’ve sent you an email.
Cindy
Cindy,
My wife and I are new to the military. We have PCS orders for August 30 of this year. We purchased our home in October of 2005. Of course I was not in the military then. Homes in our ara are selling for approx $100,000 less than we purchased for in 2005. We are debating our options…renting with hopes of market recovery, etc. Do you know if we would be eligible for HAP? After reading a few posts above, I’m going to inquire whether our lender views PCS as a hardship. In cases of PCS as a hardship for shortsell, does this affect our credit rating the same as any other short sell? Any advice would be helpful. Thanks a bunch.
Michael-unfortunately you are not eligible for HAP. However I would recommend that you speak to your lender about a short sale. Many lenders do consider PCS orders a hardship and depending on your lender you may be able to complete a short sale without having to miss a payment. If you have a VA Loan look into a VA Compromise sale.
Cindy,
Here is a question for you. In March of 2010 I received orders from Dahlgren VA to Suitland MD which authorized me a PCS move. I just received a new set of orders transferring me over seas to Guam (APR 11 orders date). Since I have not executed my new set of orders yet (I detach in SEPT11), can I file for HAP now using my last set of orders that authorized a PCS move that I did not execute? My home is located in Fredericksburg, VA. The set of orders I am executing now are the ones from MAR10 which transferred me to Suitland MD, which is over 50 miles from my home.
Thanks for the help!
Though I am not an official of HAP my initial reaction to your question is probably not. As you know the HAP application has to be verified by the personnel office. It also has your signature which states the information is true and correct. However the official answer will have to come from the HAP office in Savannah. I understand your frustration on potentially missing out on the way the rules are currently written. I’d also suggest you write to Congressman Moran regarding your support of the current bills in Congress to extend the PCS dates back to Sept 2012 and provide the additional funding required. Of course the other questions not asked are whether you bought your home prior to the June 20, 2006 deadline as well.
Cindy-
Thanks for the information and informative website. I purchased our home in OCT04 so I am well within the window on that end, but it appears that I just missed it on this end. I am now at a loss….short sale is an option if i can get BoA and NFCU to agree (I got one of those creative financing deals…that helped me to avoid PMI by financing a 1st and 2nd mortgage…the second of which I refinanced under NFCU when the interest rates were lower). Not sure how to handle that. Are there any other avenues you recommend? Trying to manage rental from 8000 miles away would be difficult at best….please help….
- Brian