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Title 32: National Defense
Subtitle A: Department of Defense (Continued)
CHAPTER I: OFFICE OF THE SECRETARY OF DEFENSE (CONTINUED)
SUBCHAPTER M: MISCELLANEOUS
PART 239: HOMEOWNERS ASSISTANCE PROGRAM-APPLICATION PROCESSING
239.5 - Benefit elections.
Section 3374 of Title 42, United States Code, as amended by Section 1001 of the ARRA, Public Law 111-5, authorizes the Secretary of Defense, under specified conditions, to acquire title to, hold, manage, and dispose of, or, in lieu thereof, to reimburse for certain losses upon private sale of, or foreclosure against, any property improved with a one- or two-family dwelling owned by designated individuals.
(a) General Benefits: (1) If an applicant is unable to sell the primary residence after demonstrating reasonable efforts to sell (see Definitions, ? 239.4(i) of this part), the Government may purchase the primary residence for the greater of:
(i) The applicable percentage (identified by applicant type in ? 239.5(a)(4)) of the PFMV of the primary residence, or
(ii) The total amount of the eligible mortgage(s) that remains outstanding.
(2) If an applicant sells, has sold, or otherwise has transferred title of the primary residence, the benefit calculation shall be the amount of closing costs plus an amount not to exceed the difference between the applicable percentage of the PFMV and the sales price.
(3) If an applicant is foreclosed upon, the benefit will pay all legally enforceable liabilities, directly associated with the foreclosed mortgage, for example, a deficiency judgment.
(4) Applicable Percentage. (i) If an applicant is eligible under ? 239.6(a)(3) or (4) and sells the primary residence, the applicable percentage shall be 90% of the PFMV. In addition, closing costs incurred on the sale may be reimbursed.
(ii) If an applicant is eligible under ? 239.6(a)(3) or (4) and is unable to sell the primary residence after demonstrating reasonable efforts to sell, the applicable percentage shall be 75% of the PFMV. Closing costs incurred on the sale will not be reimbursed.
(iii) If an applicant is eligible under ? 239.6(a)(1) or (2), the applicable percentage, regardless of whether the applicant sells the primary residence, shall be 95% of the PFMV. In addition, closing costs incurred on the sale may be reimbursed.
(b) Rules Applicable to All Benefit Calculations. (1) Prior to making any payment, the Government must determine that title to the property has been transferred or will be transferred as the result of making such payment. If the Government determines that making a benefit payment will not result in the transfer of title to the property, no payment will be made.
(2) A short sale will be treated as a private sale. If an applicant remains personally liable for a deficiency between the outstanding mortgage and the sale price, the amount of this deficiency may be included in the benefit, provided that the total amount of the benefit does not exceed the difference between 95 percent of the PFMV and the sales price.
(c) Payment of Benefits. (1) Private Sale: Where a benefit payment exceeds funds required to clear the mortgage and pay closing costs, benefit is paid directly to the applicant.
(2) Government Purchase: Benefit is paid directly to the lender in exchange for government possession of the property. Since the benefit reimburses the applicant a percentage of the applicant's purchase price, if the benefit exceeds the mortgage payoff amount, the applicant will receive a benefit payment for the difference between the mortgage payoff and the total benefit payment.
(3) Foreclosure: In the case of a foreclosure, benefit is paid to lien holder for legally enforceable liabilities.
(d) Tax Implications. Under current law, Expanded HAP benefits, including any payment of closing costs, are taxable and subject to withholding.
(1) Expanded HAP payments to, or on behalf of, all civilian applicants are considered income and are taxable as wages.
(2) Payments to, or on behalf of, all members of the Armed Forces are considered income and are taxable. Payments to military members are not subject to social security or Medicare taxes.
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