Some military families will get help selling homes

For many military families, the prospect of moving and selling a home amid the biggest housing decline in decades is daunting, but a little-touted provision in Congress' economic recovery package could throw some a lifeline.

The stimulus package includes $555 million in aid to compensate military service members who are given orders and must sell their homes for less than market value. The Department of Defense would reimburse the individuals for up to 95 percent of the loss if the homes were purchased before July 1, 2006. The department could also elect to purchase the homes for up to 90 percent of the fair market value.

However, many families who qualify for the program are in a holding pattern until the department clarifies whether it will use the value of the home at the time of purchase or the value in today's market. The difference could mean tens of thousands of dollars in aid.

Home prices in South Hampton Roads have dropped steeply in the past year, according to Real Estate Information Network Inc. In January, the median sale price for existing homes was $194,000, down 13.7 percent from $224,900 a year ago. The median is the point at which half the prices are higher and half are lower.

At the same time, home sales have hit their lowest point since 2005. The service reported that 435 existing homes and condominiums were sold last month in South Hampton Roads. That's down 31.4 percent from December and down 36.6 percent from 686 in January 2008.

"We're doing... everything we can to address private home sale losses," Pentagon spokesman Navy C mdr. Darryn James said of the assistance. He said the defense department is reviewing the program to determine the eligibility requirements but it has set no deadline for decisions.

The legislation is an expansion of the Homeowners Assistance Program, which is administered by the Army Corps of Engineers.

It was originally created to help military personnel forced to sell their homes after a base closing. The expansion of the program to include those affected by the housing downturn would last until 2012. However, those who bought after the July 2006 deadline are not eligible.

Iris Finn, an agent for Exit Realty Professionals in Virginia Beach, said military members across the region have gotten stuck with homes after getting orders amid the slow market.

"People are excited about the program, and they're confused," said Finn, who specializes in working with military families. "They're hoping it works out in their favor."

Finn said the confusion stems from uncertainty about how much homeowners would be reimbursed and who would be eligible.

The program could allow Lorelei Redmond, whose husband is a master gunnery sergeant in the Marine s, to sell for a loss without incurring massive debt or dipping into savings. It could help the family avoid a short-sell - selling for less than they owe their lender.

The couple bought their home in Salem Village in August 2005 for $215,000. Last month, Mark Redmond received orders to a base in Twentynine Palms, Calif. The couple have until July to sell their home.

"At the end of the day, we can't afford to be sitting on a house with a mortgage while we're in California," said Lorelei Redmond, 42. "The primary reason we bought is because we had a teenager in high school and didn't want to move around. But we bought within our means, and we didn't get any of that crazy financing."

The Redmonds listed the home last month for $226,000 - with closing costs and other fees, just enough to break even. Though a few people have stopped by to look at the house, no offers.

"We wouldn't want to profit off the government here," Redmond said. "But we go at the whim of the military. So I think there should be some help just to get us out from underneath this."

The program could be less beneficial for Shawna Olson, a Navy lieutenant. Olson and her husband, who's also in the Navy, bought a Chesapeake home in June 2003 for $210,000.

As home values in the region soared, the couple refinanced to pay off other debt.

Navy orders are now sending the couple to Hawaii. The Olsons put their house on the market for $329,900 - the amount they need to break even.

Other homes in their Western Branch neighborhood are selling for nearly $100,000 less. If the defense department decides their home is worth $250,000, for example, it would still leave the Olsons in the hole for the difference.

"Selling for anything less than $10,000 below what we owe is going to be tough," said Olson, 36. "We didn't want to do anything that would adversely affect our credit."

Renting the home out didn't seem like the best option, she said, because they don't plan to return to the area. They also considered a short sale until they heard of the new program. "We're really wanting for the new package to help us," she said.

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com