When Your Home Value is Upside-Down

Signing a letter.

NEWPORT NEWS, Va. -- In a few months, Jennifer Hernandez's husband, who's active-duty Air Force, will get permanent change-of-station orders.

Problem is, they're "underwater" on the York County, Va., house they bought in 2007, meaning they owe more than the home is worth, because real estate prices have fallen.

Hernandez, a real estate agent with Liz Moore & Associates in James City County, Va., said she knows of 10 other families in similar situations.

Hernandez is involved in the National Military Family Association and acquainted with Holly Petraeus, wife of U.S. Army Gen. David Petraeus, commander of the coalition forces in Afghanistan. Holly Petraeus was appointed to lead a team creating the Office of Servicemembers Affairs within the new Consumer Financial Protection Bureau.

Hernandez recently talked to Holly Petraeus about the real estate challenges facing military families. She is now partnering with the Office of Servicemembers Affairs to collect their stories to present to the Department of Defense.

"There's no statistical tracking of active-duty military, if they're going into foreclosure, if they're going into short sales," she said. "Until Washington can put a face on the issue, it is difficult to get action started in Congress or in policy circles. That's what I want to do."

At the same time, the Department of Defense is cutting billions from its budget in light of rising national debt. This makes it all the more difficult.

Hernandez often works with relocating military families. In recent months, she's encountered 10 who were getting orders to move and, as a result, face short sales or foreclosure.

Even if families tried to keep their homes in Hampton Roads, Va., their Basic Allowance for Housing when they move elsewhere might not cover the mortgage. Housing allowances in some other areas are much lower than they are here, she said.

In her case, she plans to stay in the house while her husband moves without her. They don't want to sell it for a loss, she said. They're concerned about her husband's security clearance if they take on more debt to purchase or rent another home.

Some military families may qualify for the expanded Department of Defense Homeowners Assistance Program. Congress approved $855 million in funding to reimburse servicemembers for part of their loss from selling their home, assist them if they don't have funds from the sale to pay off the mortgage, purchase homes or provide assistance in the event of a default, according to the program website, http://hap.usace.army.mil/.

As of March 2, the program has assisted 4,934 homeowners at a cost of $744.5 million. Another 4,524 claims are being evaluated, Defense Department spokeswoman Navy Cmdr. Kathleen Kesler said.

The assistance is available to military personnel who bought homes before July 1, 2006, and were reassigned between Feb. 1, 2006, and Sept. 30, 2010.

But many military members bought after the July 1, 2006, cutoff, so they don't qualify, Hernandez said. She and her husband are in that situation. But Kessler said there's "no authority" to expand the program and not enough funds to extend the eligibility to servicemembers reassigned after Sept. 30.

Of the families Hernandez knows in this predicament, four will rent out their Hampton Roads homes. The others are unsure whether to rent, try a short sale or let the home go into foreclosure, she said.

"I'm just trying to bring it to everybody's attention," she said.

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