There are four types of benefits available under the Expanded HAP program.
1. Private Sale Benefits: If you have already sold your property or you are able to pay any loss on the sale at the time of closing, private sale benefits are paid directly to you after the closing. PCS and BRAC 2005 applicants would be reimbursed for 90% of the prior fair market value (defined as the price you paid for the property) of their home minus the sale price, plus allowable closing costs (such as realtor’s commissions). Traditional BRAC applicants, wounded warriors and surviving spouses are reimbursed for 95% of their prior fair market value.
2. Short Sale Benefits: Are calculated the same as Private Sale Benefits, unless the applicant is left with an outstanding obligation after the sale of the property. If there is a substantial obligation remaining, benefits will be calculated as an amount not to exceed the difference between 95% of the prior fair market value and the total of the short sale, plus the amount of the forgiven obligation. If there is no outstanding obligation, benefits would be calculated at 90% of the prior fair market value. However, if the amount of the mortgage that is forgiven by the lender exceeds the Expanded HAP benefit, the applicant would only be entitled to closing costs.
3. Private Sale Augmentation Benefits: Calculated the same as Private Sale Benefits. However, if you are unable to pay the loss on the sale of your property at the time of closing, these benefits would be paid at the time of closing to cover some or all of the funds needed to pay off the outstanding mortgage. Any funds remaining after the sale is complete will be distributed to the applicant at settlement.
4. Government Acquisition Benefits: Are designed to assist applicants who are “upside-down” with their mortgages, and are available to PCS qualified applicants who are able to bring a willing and capable buyer to settlement. The Government will pay the greater of 75% of the prior fair market value or will pay off the mortgage for PCS, Traditional and BRAC 2005 applicants. For wounded warriors and surviving spouses, the Government will pay the greater of 90% of the prior fair market value or the mortgage balance. In addition, allowable closing costs are also paid (including realtor’s commissions).
A. Please note: wounded warriors, surviving spouses and Traditional BRAC applicants do not need to bring a willing buyer to settlement in order to qualify for this benefit.
B. It is also important for applicants seeking this benefit to ensure that they are current with their mortgage payments, and any fees associated with owning the home (i.e., HOA dues or condo fees).
It is possible to increase the amount of your prior market value, for purposes of calculating your benefits, if you made improvements to your property. At the time of application, you will be asked if any improvements were made to the property, and if so, you are asked to submit copies of paid receipts. However, items such as painting are considered home maintenance items, and will not be included.
Here is an example of how to calculate private sale benefits:
Your original purchase price was $200,000
You made $10,000 worth of improvements to the property.
$200,000 Purchase Price
+ $10,000 Approved improvements
$210,000 “New” Prior Fair Market Value (PFMV)
$189,000 Starting valuation for benefits
- $150,000 Sales Price (within 10% of the current fair market value)
$ 39,000 Property benefit
+ $ 15,000 Approved reimbursable closing costs
$ 54,000 Total benefit you would receive after closing
Once a determination is made as to the benefits the applicant will receive, an additional thirty (30) to sixty (60) days will be needed to proceed to closing, if you are receiving Private Sale Augmentation Benefits or Government Acquisition Benefits.
What does the closing process entail? Stay tuned for Part V – Closing Process.