This fund finances a program for providing assistance to homeowners by reducing their losses incident to the disposal of their homes when the military installations at or near where they are serving or employed are ordered to be closed or the scope of operations is reduced. It was established in recognition of the fact that base closure and reduction actions can have serious economic effects on local communities. Military, federal civilian personnel and Non-appropriated Fund employees, who are required to relocate as a result of or during such actions, frequently cannot dispose of their homes under reasonable terms and conditions, and suffer severe financial hardship.

In order to determine the effect of the closure or reduction action on local communities, a Market Impact Study (MIS) is performed. The MIS addresses real estate market and overall economic conditions relative to the closure or reduction action, and includes appraisals of area properties before and after the announcement. Factors in determining market impact include: a significant decline in real estate market value; significant increases in inventory of unsold houses, average number of days on the market; foreclosures; decrease in home sales; and inability of affected personnel to sell homes for the amount of the existing mortgage(s). If the MIS demonstrates sufficient impact on the market and establishes a causal relationship, a program is implemented. Eligible applicants may be reimbursed for certain losses resulting from the sale of their home.

Benefits under the program include payment of partial compensation for losses sustained in the private sale of the dwelling; payment of the costs of a judicial foreclosure of a mortgage; or purchase of a dwelling by liquidating or assuming the outstanding mortgage(s).

Although the program provides for acquisition of dwellings, the Government does so only for the accommodation of the applicant. The homes are then resold by the Government. Every effort is made to insure that each applicant is treated equally and receives the maximum benefits under the law as rapidly as practicable, but with a minimum expenditure of time and money for administration.

Program Summary

The FY 2005 budget requests no additional authorization of appropriations and appropriations to fund Homeowners Assistance Fund program expenses. Total program estimate for FY 2005 is $11,542,373 and will be funded with revenue from sales of acquired properties, and prior year unobligated balances. Program expenses include payments to homeowners for losses on private sales; cost of judicial foreclosure; property acquisition by liquidating and/or assuming outstanding mortgages; partial payment of homeowners' lost equity on government acquisitions; retirement of debt after sale of properties when the government assumes mortgages; and administrative expenses. The Homeowners Assistance Fund, Defense (HOA) is a non-expiring revolving fund. The Program Financial Summary chart that follows shows that the fund receives funding from several sources: appropriations, borrowing authority, reimbursable authority, prior fiscal year unobligated balances, appropriation transfers, revenue from sale of acquired properties, and recovery of prior year obligations. The fund is not a profit-making endeavor. Although the proceeds from the sale of homes are returned to the fund, this revenue does not always replenish it nor totally fund projected requirements. Since the Homeowners Assistance Fund is not self-sustaining, periodic appropriated funds are required to maintain its solvency as a revolving fund. In the past, Congress has authorized the transfer of funds from the BRAC account to the Homeowners Assistance Fund.

Program estimates indicate the current HAP financial condition requires no additional funding in FY 2005. This estimate is based on currently identified requirements from unit restationing, base realignments and closures. DoD plans for infrastructure and staff reductions may increase HAP costs in the future.