Members of the military who find themselves in a short-sale situation now have a new tool via the Homeowners Assistance Program (HAP) through the Department of Defense (DoD).
Congress expanded HAP when they passed the American Recovery and Reinvestment Act of 2009; and now nearly every military personnel involved in a short sale can get financial help through HAP if they find themselves upside down when they must sell because of a mandatory permanent transfer.
The HAP website (https://hap.usace.army.mil) contains several brochures for military personnel and for real estate professionals to help understand the expanded guidelines for those using the program.
Authorized under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, HAP is a law that is managed by the U.S. Army Corps of Engineers "to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement." The American Recovery and Reinvestment Act expands the legislation temporarily for DoD employees caught up in the mortgage crisis. Those who can apply for assistance include:
- service members and DOD employees who are wounded, injured or become ill when deployed;
- surviving spouses of service members or DOD employees killed or died of wounds while deployed;
- service members and civilian employees assigned to BRAC 05 organizations; and
- service members required to permanently relocate during the home mortgage crisis.
The assistance is limited to employees who were reassigned within about a 5-and-a-half year period between 2006 and 2012 and the house being considered must have been the applicant's primary residence. Some of the criteria for eligibility include:
- Permanent reassignment requires move of more than 50 miles.
- Reassignment ordered between 1 February 2006 and 30 September 2012.
- Property purchased (or contract to purchase signed) before 1 July 2006.
- Property was the primary residence of the owner
- Owner has not previously received these benefit payments.
An online brochure, which can be printed via a PDF file, is available here.
This next paragraph is very important for purchasers of houses where the HAP program is being used.
The execution of this program requires the assignment of the contract to the Department of Defense, via the U.S. Army Corps of Engineers. In essence, the seller conveys the house over to the USACE and then the purchaser buys the house from the USACE all at the same time at the same settlement or escrow table. Your state laws may require a few differences, but this is how it's executed on the ground level.
Many Realtor contracts contain paragraphs that will not allow the assignment of a contract, so military sellers using HAP may need to strike this paragraph to allow the contract to go through without any hiccups.
An "assigned" contract is one where one party in a sales contract can assign their interests over to a third party before settlement. It would say something like: "this contract is between 'Mr. and Mrs. Seller' and 'Mr. and Mrs. Buyer and/or assigns.'"
With this language, it allows Mr. and Mrs. Buyer to slip in Mr. and Mrs. Buyer-2 at some point in the performance of the contract. It's legal, and is usually used via a pre-foreclosure contract where one party is finding houses for sale and selling them to a secondary buyer once they get the terms of the contract in place.
Thus, in the use of the DoD's HAP program, the purchaser needs to understand that at the end of their contract, before they go to settlement, the seller will no longer be Mr. and Mrs. Seller, but the U.S. Army Corps of Engineers.
For details on how the HAP program works, visit here.