Like their fellow federal employees, military families purchasing and selling homes should be reimbursed for their settlement costs and should not be left holding the financial bag when forced to sell their home in a down market.
There, somebody has finally said it.
We think it is high time that this major quality of life issue be thrown ?on the table? and addressed head on. Furthermore, VR SAM? believes that a thoughtfully developed program can be a win for the government, a win for the taxpayer, and a huge win for the military family. If this resonates with you, then please read on. This article will:
- Present the case for a Military Home Owners Safety Net Program.
- Offer a "Strawman Safety Net Program" as a starting point.
- Suggest ways to offset the costs of the program.
- Offer YOU, the opportunity to share your personal experiences and voice your thoughts via the VR SAM Blog.
This proposal strives to be fiscally responsible. It has clear benefits to our service families, but it designed for career servicemembers / families and is NOT intended as a "bail out" for every situation. Please note: It does not propose a safety net for every financial situation. It should be viewed as more of a limited once or twice per career ?silver bullet.?
Background
When the government asks federal employees to relocate, the family (agency dependent) can sell their existing home and purchase a new one in their new "duty station" without worrying about losing money in a weak housing market. This is possible due to government assistance with settlement costs and fair/equitable guaranteed "buy out" programs. This benefit enables federal employees to participate in the potential appreciation, and tax benefits, from home ownership. Similar programs are available for most large corporation employees as well. Such programs likely result in increased family stability, retention, overall employee morale and productivity.
This same benefit is not available to uniformed servicemembers who risk life and limb daily in the defense of our country. Perhaps no professional group in the world is subject to more involuntary relocations in a career. Furthermore, short notice orders to a new duty station are not unusual, creating increased family stress compounded by financial turmoil. Military families are frequently assigned to high cost areas where leases are expensive and with limited or perhaps no base housing options. Many of them, from junior enlisted to senior officers, will only purchase their first home after they leave or retire from the service. If they do purchase a house, they are completely on their own to sell or rent the house. If all else fails, they leave their families behind until they can liquidate their residential asset. Whether they purchase out of choice or necessity, the Military family alone absorbs the settlement costs out of their own hard earned savings. And, the family incurs all of the risk inherent in a home purchase, even though the relocation is imposed by military orders.
Have you been there? Or have these concerns prevented you from buying your own home?
So why hasn't a safety net program for military families been developed previously?
We think there are two reasons for this:
- One obvious reason is the assumption that such a program would be too expensive given the large number of servicemembers. We will address this assumption later in the article.
- The second reason is not so obvious. Until recently, prospective military home purchasers were required to come up with the cash for both the down payment and the settlement costs. The combination ? which could be $10,000 to $20,000 or more ? simply made a home purchase unfeasible.
The mortgage loan industry has changed dramatically over the past few years. For families with good credit scores, there are a number of ?zero or minimal down? loan products. This leaves only the settlement costs themselves as the primary obstacle to purchasing a home. The inability to recoup the initial settlement costs through appreciation in an unfavorable market also represents ?most? of the risk if forced to sell two to four years later in an unfavorable market. In essence, in the past government assistance with settlement costs may not have been enough help given a requirement for a 5 percent or more down payment.
VR SAM believes that no professional group in our country is more deserving of financial support in homeownership than the men and women of the U.S. Armed Forces. Simply by virtue of their service to our country, the "American Dream of homeownership" is extremely hard to achieve, extremely risky, or simply out of reach.
Today's servicemembers are highly educated and more sophisticated in financial matters than in years past. They invest in mutual funds, understand markets, and retirement plans. They also understand the tax advantages of home ownership, and that home ownership offers the best potential for investment appreciation and building wealth for most American families.
A "Safety Net" program for American servicemembers and their families similar to that enjoyed by their fellow federal employees and employees of large corporations is clearly overdue. The associated costs of a well-designed program could most likely be off set, or even result in cost decreases relative to current programs to house military families.
Could a safety net program be a win-win-win for servicemembers, the government, and the taxpayer? Absolutely.
What would a safety net program look like?
The following is simply a "Point of Departure" that could be blended and revised after cost studies and other in-depth analysis by DoD.
- Participants
All active-duty personnel (including career active duty Reservists) from all uniformed services. - Eligibility
Enlisted ? Upon commencing second enlistment.
Officers ? At commencement of their sixth year of active service - Basic program benefits:
Settlement Cost Assistance ? Fixed amount of assistance with qualified purchase and sale of home settlement costs.
?Safety Net? when selling home due to PCS orders- guaranteed buyout (when unable to sell) at a price based on independent appraisals. - Limits
Maximum two claims/benefits per 20-year career. For instance, eligible servicemembers could apply for settlement cost reimbursement and/or ?buy out? from an unfavorable market only twice.
Maximum three claims/benefits per 20-plus year career.
BRAC closures may be exceptions to the maximums.
It sounds expensive. Why would the government go along with this?
The likely reason this issue has never been seriously addressed before is the immediate ASSUMPTION that it is too expensive. Obviously any such program would and should be carefully studied for cost effectiveness. We believe the following represents just a few of the definable savings that could offset the cost of the program.
Potential Cost Offsets to the Government and Taxpayers
? Increased retention, and therefore reduced recruitment and training costs. It costs a bundle to recruit, train, and retain quality servicemembers for our high tech military. We believe that these savings alone could potentially pay for the program.
? Reduced expensive government-owned and/outsourced base housing costs.
? Please note: Present base housing out-sourcing initiatives clearly benefit developers and property managers. A safety net program could gradually shift some of the profits enjoyed by developers/ property managers to home investment appreciation and tax advantages for military families.
? Reduced federal government subsidies for school districts with large ?base housing? student populations.
? Increased local property tax bases.
? Increased benefit to local community economies ? builders, building supplies, home improvement, merchants, financial institutions, etc.
Intangible Benefits to Military, Families, and Local Communities
? Increased service member/family choice, independence, and morale.
? Increased integration and involvement by military families in all aspects of the local community/affairs.
? Improved perception, appreciation, and understanding of military / culture in general by the citizenry.
Although a thorough study may demonstrate that the costs of a ?safety net? program may fully offset, or even save taxpayers' dollars, the primary reason for such a program is simply that it is
?The right thing to do.?
Who are likely Supporters and Champions of a Military Safety Net Program?
? VR SAM?... We are dead serious about making this an issue that must be addressed.
? Federal Politicians ? With the upcoming 2008 Presidential / Congressional elections on the heels of an extended war, politicians from both major parties can find lots of reasons to support a win-win-win. This is a great way to go beyond rhetoric, letters, banners, cookies, etc. to really ?Support the Troops.?
? State and local politicians, and Chambers of Commerce, with military installations in their districts for the same ?Support the Troops? reason. Plus it increases the property tax and business bases in their respective districts.
? Powerful trade organizations for Realtors/Mortgage Brokers/Home Builders/Insurance Underwriters.
? Powerful Non-profits Organizations that support military causes.
VR SAM? works with Military Families every day dealing with the tough and highly stressful issues addressed in this article. We firmly believe that a ?Military Safety Net Program,? similar to that enjoyed by other federal employees can be a win for everyone. More importantly, it is clearly the equitable and right thing to do for our Military Families. As always, we want to express our sincere gratitude to our Military Members and Families for their service and sacrifices.
VR SAM? sincerely appreciates Military.Com affording us the opportunity to share this concept with you. We would appreciate your thoughts and experiences.
Sound off on: HTTP://VRSAM.BLOGSPOT.COM/
