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A program to help military homeowners caught in the downturn of the housing market can start processing applications Wednesday, sources said, with the scheduled publication of the implementing rules in the Federal Register.

About 4,300 homeowners have already applied for assistance under the expanded Homeowners Assistance Program, which was signed into law Feb. 17 with $555 million in funding. Eligible are people on permanent change-of-station orders, wounded warriors, surviving spouses and those affected by base realignment and closure actions.

Wounded warriors and surviving spouses receive priority in the program, although about 98 percent of the applications received so far have been in the PCS category.

The Army Corps of Engineers, which runs the program, has been increasing staff and preparing to start processing applications. Some service members have said that HAP officials have been doing initial reviews of their applications, asking for more information, to further prepare in advance.

But the primary issue that has held up the program for six months still looms: Homeowners who receive benefits under the expanded HAP will have to pay taxes, and the taxes will be withheld upfront. Recently introduced legislation that would fix the problem and make the benefits tax-exempt is still pending.

For now, the tax requirement will limit the number of people who can be helped, because service members who are “upside-down” on their mortgages — those who owe more on their mortgages than the sale price of their homes — would not have enough money to take to the table to close the sale.

Defense officials have been exploring options that could help these service members.

Each individual’s situation will be different, and service members will have to decide what is best for their circumstances.

If they qualify for the program, those who have already sold their homes at a loss can be reimbursed for part of the loss, minus the tax withholding.

The program is retroactive for those who received PCS orders on or after Feb. 1, 2006. Homeowners affected by PCS or base closure actions must have purchased homes before July 1, 2006. Additional eligibility requirements will be included in the final rules.

Although there still will be a 30-day comment period on the implementing regulations in the Federal Register, the Corps of Engineers will be able to process applications starting the day of publication.

The tax issue is out of the Defense Department’s hands, and the Office of Management and Budget and the Internal Revenue Service had tried to come up with a resolution. Assistance under the original HAP, created to help those affected by base closure actions, is not taxed. But that tax exclusion was not written into the provision that expanded the program.


Article: http://www.militarytimes.com/news/20..._help_092909w/
Homeowner Assistance Program: http://hap.usace.army.mil/