Homeowners’ Assistance Program and the VA Loan Program
You may not have heard of the Homeowners’ Assistance Program (HAP). It is administered by the Department of Defense and is available to certain eligible individuals. It is not directly related to the VA loan program but can offer an additional layer of protection and assistance for a veteran struggling with keeping a home purchased with their VA loan benefits. In this article, we’ll talk about who is eligible for HAP, what benefits HAP provides, and how it all plays into the VA loan program.
Who Is Eligible for HAP?
Who is eligible for HAP actually changes from time to time as appropriate. The HAP website provides the following: “Section 1001 of the American Recovery and Reinvestment Act of 2009 expanded the HAP authority to authorize the Secretary of Defense to provide financial aid to: members of the Armed Forces (30% or greater disability) who incur a wound, injury, or illness in the line of duty during a deployment in support of the Armed Forces on or after September 11, 2001; wounded DoD and Coast Guard civilian homeowners reassigned in furtherance of medical treatment or rehabilitation or due to medical retirement in connection with a disability incurred in the performance of his or her duties during a forward deployment occurring on or after September 11, 2001 in support of the Armed Forces; and surviving spouses of fallen warriors who move within two years of the death of such employee or member.”
In other words, wounded, injured, ill, or surviving spouse applications are all accepted. At the moment, only applications from those persons are being accepted for HAP.
What Benefits does HAP Provide?
The purpose of HAP is to provide assistance when a veteran is facing foreclosure or a short sale on their home. As anyone who has experienced a foreclosure or short sale knows, they are very difficult situations to be in, and a little help at the right time can make all the difference. The HAP website has the following explanation of benefits: “If an applicant is eligible under the Wounded, Injured, and Ill or Surviving Spouse categories and money is available, HAP may provide financial assistance under one of the following three scenarios: Private Sale, Government Acquisition, or Foreclosure:
- Private Sale: Benefit amount is the difference between 95% of the home’s prior fair market value and the selling price. HAP may also reimburse the applicant for normal and customary seller’s closing costs;
- Government Acquisition: Benefit amount is the greater of 90% of the home’s prior fair market value OR the mortgage(s) payoff amount;
- Foreclosure: Benefit is paid to the lien holder for legally enforceable liabilities.
How It Works with the VA Loan Program
HAP’s contribution to the veteran’s short sale or foreclosure can prevent the borrower’s VA loan entitlement from being used up permanently to make up the difference to the lender. The VA guaranty is made to the lender as a way of minimizing the risk the lender takes on for the loan, and when the borrower defaults on the loan the VA pays up to the full guaranteed amount on their behalf. When this happens, however, the borrower loses that entitlement because it has been spent. If the veteran is able to qualify for and receive HAP assistance, their VA loan benefits will either not be reduced at all or not nearly as much. In this way, HAP can assist a VA borrower in a major way.
Though separate, HAP and the VA loan program are both affected based on a veteran’s disability status. If a veteran has a sufficient disability, they may be exempted from the VA Funding Fee at the time they purchase their house. Likewise, in order to qualify for assistance from HAP at all, the veteran must be at a minimum of 30% disability. HAP is also strictly limited by the amount budgeted for it by congress while the VA loan program is only loosely constricted since much of the cost of the program is defrayed by the Funding Fee. If you’re in a situation where you may be in need of HAP, visit the DoD’s website linked above to apply. You can also contact the HAP National Office or the Savannah District of the U.S. Army Engineers.