Home Equity Assistance & "Military Families Pushed to Financial Ruin" (Merge)

[acooper]

We just sold, although still pending an inspection, for 17.5k less than appraised, 12.5k less than asking price. We'd been on the market for almost 6 months, in Windsor. We paid 1.5k more than the current appraisal for the place, but put in probably 20-30k of work (all before my husband CT'd to RegF). We'll probably be going for 100% HEA - if there's a market in Canada that's depressed, it would be Windsor...

 

[heavy reader]

These families should be made aware of this issue before they sell. If it were me, I wouldn't be gambling my financial future on the hopes the policy changes. Hard decisions might have to be made, like going IR, or renting at the new location instead of buying.

It's not a hope that the policy will be changed, its a hope that the policy will be adhered to.  Again, I stress that the battle to have 100% HEA as an entitlement was already fought and won.  The policy is written, now the only issue remaining is to honor the policy for those who need it to put food on the table.  Renting at the new location will not resolve the $70,000+ deficit that some of these soldiers and their families are facing.

How many more troops have to loose a year or more's wages until this is addressed?

Don't forget that for each person affected, there's a family attached that has to suck up kraft dinner and squabbles over "can we afford groceries this week" until it gets resolved.

Congrats to those of you who just sold your house.  Don't forget that the bank's coing to come calling for the difference between your outstanding mortgage and your selling price before porting your mortgage.  Then you get the joy of, yup, paying more CMHC fees because you no longer have 5% down (if they will give you a mortgage).  And yes, I know the CMHC fees are covered, but they are a taxable expense.  SO in my case, the 12k CMHC fees will cost me an extra 6 grand at tax time.  Oh, thats on top of the approx $1000/month interest for carrying forward the debt from the loss.  Just keeps getting better and better.

Now that my monthly whining is done, if anyone needs some help, drop me a line.  You are in for one bumpy ride.

 

[acooper]

Heavy - thankfully, we're not going to be that upside down on our mortgage - only about $300 dollars, I think. And my parents, thankfully, are covering the gap (about $2k total of outstanding house-related debt) until some of our HEA can kick in, or we can afford to repay them. I wouldn't have been able to sell the house at this price otherwise. We've decided to rent for now, until we can build a nest-egg up again, and know that we'll be someplace for a length of time. My husband may well be posted out of Ottawa when he's done his QL5A in 2012, so we don't want to buy there right now.  SHHO will do fine for the time being.

Our intent is to go for 100% HEA, of course - we are selling for quite a bit less than what we've put into the place. I know we may not get it. But I'd rather not get my money out of this place than end up divorced...

 

[captloadie]

It's not a hope that the policy will be changed, its a hope that the policy will be adhered to.  Again, I stress that the battle to have 100% HEA as an entitlement was already fought and won.  The policy is written, now the only issue remaining is to honor the policy for those who need it to put food on the table.  Renting at the new location will not resolve the $70,000+ deficit that some of these soldiers and their families are facing.

How is the policy not being adhered to? The policy doesn't say it guarantees 100% reimbursement for all losses regardless of cause. You've quoted the important part of the policy numerous times - it has to be considered a depressed market by the Treasury Board. The policy you say the CF fought long and hard to get implemented has a great big loophole, in that it allows the TB to have final say on an issue it isn't an expert in. If they say it isn't a depressed market, that is the final word. So policy is being followed. If you are looking to blame anybody, you should be looking at the CREA, who keeps blowing sunshine up the public's a** about how great the real estate market is. The TB, not being the  experts, go to organizations who are SMEs to get their data, and the CREA is likely at the top of the list.

I would like to know how many CF families are affected by this decision. How many are facing 10s of thousands in losses, because they sold before members were made aware that currently 100% HEA was not being granted. I do feel for those that sold in 2008 and early 2009 before this issue really bubbled up. Since then, members should have been aware that before selling, or buying, they had to consider they would not get HEA.

 

[dapaterson]

it allows the TB to have final say on an issue it isn't an expert in.

And how many folks at TBS do you know?  How many in Comp and Benefits?  Do you know their backgrounds?

For example:

http://sage-geds.tpsgc-pwgsc.gc.ca/cgi-bin/direct500/eng/REcn%3dBelovich%5c%2c%20David%2cou%3dSNCPAC-GRSAAPC%2cou%3dSCM-GRS%2cou%3dCLRS-SRRT%2cou%3dOCHRO-BDPRH%2cou%3dTBS-SCT%2co%3dGC%2cc%3dCA

at TBS looks suspiciously like someone listed at

http://www.gg.ca/document.aspx?id=13537

 

[captloadie]

I don't get your point. I didn't say they weren't competent, or didn't know the job they are supposed to be doing, I said they weren't experts in the real estate field. And if he was a Colonel up until recently, I again ask, what is his background in evaluating the economic trends of the area we want to be deemed as depressed markets?

And this isn't a reflection on the good Mr Belovich, but I know of several military members who were less than competent in uniform who managed to get very nice civil service jobs that one might question whether they were qualified for.

 

[QM]

I agree that a member should not be out of pocket for a move imposed on them by the CF. Just because we sign on the dotted line does not mean the government has a blank cheque to abuse us. Yes there are members who buy houses out of their league (quite a few of my fellow Officers are the worst offenders) and for those folk, well.....you could always have bough a cheaper house in a cheaper neighbourhood and sent your kids to a more.....diversified school instead of that ritzy one in St. Albert or The Glebe (but I understand and support your desire to have the best for your family so no judgement here). But..... they are taking a gamble on a big housing loss by buying in a big neighbourhood.

Its wholly unfair though, for the soldier who has to get in over his head simply to have a roof over his family's head, to lose four figures on a move. That soldier should not be punished for being ordered to a new posting. The challenge though, is how to deal with it? We all know that any policy put in place to alleviate the legitimate pain of that small percentage of cases that need help - will quickly become an entitlement that every greedy member wants access to. Look at IR as the perfect example - a planned one-year benefit to allow you to deal with a temporary major family circumstance, that quickly became the default setting on posting. Yes it kept some people in the CF who would otherwise have quit......but holy abuse Batman!!!

This is why there are such stringent rules imposed by T-Board. To ensure that ONLY those who truly need help, get help (ie. the Windsor family). But what do we do when the overall Canadian housing bubble bursts? The Economist magazine says Canada has the most inflated housing market in the Western world!!! What happens when the market drops by 20% or more and all Canadians are losing money?? Do CF members get reimbursed while civilians lose their shirts? My answer.....yes, they had better.  Because the average civilian, as hard as some of them have it, has a choice to move, and usually moves to better their circumstance.  Military personnel are moved because the system has determined that they can better serve their country in a different location. That is a unique circumstance that requires a unique set of regulations to administer those pers who are working on behalf of Canadians at the pleasure of the government.

But I'm not sure how it would play in the Globe and Mail if CF members who lose on housing get massive payouts while auto plants shut down in Windsor and Oshawa etc, and civilian Canadians lose their shirts. It may be a "benefit too far". But, the strict application of reasonable and considered guidelines will ensure we are paying out to the right people.

However I think the T-Board's view is that the member could always cut back on middle-class niceties that are, after all, not an entitlement, and would thus be quite hesitant to reimburse us for losses.

FWIW, how the market affected me:  I'm a debt-free LCol who dumped his home equity into GIC's and has been renting for the past 3 years, because of volatility in the Alberta housing market and in anticipation of a drop in housing prices. I was hoping to avoid the six figure losses some of my friends have incurred (although others have profited 6 figures - all depends on timing). In retrospect I would likely have broken even over the past 2 years in Edmonton, as the market is roughly where it was when I came here. I'm probably out of pocket $4K  - $7K of "lost" capital growth had I been paying a mortgage and sold at zero profit/zero loss (made some cash on the GIC's, have lower rental cost than ownership costs since I don't pay taxes or utilities or furnace repair etc). I am happy with my gamble, and I don't have to fret over a home-sale when I get posted out. But if a guy with my salary is scared of the housing market, I really feel for NCMs with a bigger family or a wife who doesn't work. Ugly times, so have sympathy for the ones who are losing their shirts, as its not always their fault.

 

[heavy reader]

How is the policy not being adhered to? The policy doesn't say it guarantees 100% reimbursement for all losses regardless of cause. You've quoted the important part of the policy numerous times - it has to be considered a depressed market by the Treasury Board. The policy you say the CF fought long and hard to get implemented has a great big loophole, in that it allows the TB to have final say on an issue it isn't an expert in. If they say it isn't a depressed market, that is the final word. So policy is being followed. If you are looking to blame anybody, you should be looking at the CREA, who keeps blowing sunshine up the public's a** about how great the real estate market is. The TB, not being the  experts, go to organizations who are SMEs to get their data, and the CREA is likely at the top of the list.

I would like to know how many CF families are affected by this decision. How many are facing 10s of thousands in losses, because they sold before members were made aware that currently 100% HEA was not being granted. I do feel for those that sold in 2008 and early 2009 before this issue really bubbled up. Since then, members should have been aware that before selling, or buying, they had to consider they would not get HEA.

Log O:

I keep quoting the policy because Treasury Board has not defined  "any area in Canada" as a depressed market.  Therefore, there is a policy which looks good on paper, but there is no intention to honor it.  Especially when they are provided with substantiation of a depressed market (average home sale loss exceeding 20% due to local economic effects), they do not review these.  I know several people on the survey indicated they got 100% HEA (but that is likely $15,000 or less.  I am particularly speaking about those in excess of $15,000 loss of Home Equity.  Does this clear it up a little?

Several previous posts discussed the warnings from CMs on posting to the subject areas, as well as limitations on renting. 

 

[heavy reader]

I agree that a member should not be out of pocket for a move imposed on them by the CF. Just because we sign on the dotted line does not mean the government has a blank cheque to abuse us. Yes there are members who buy houses out of their league (quite a few of my fellow Officers are the worst offenders) and for those folk, well.....you could always have bough a cheaper house in a cheaper neighbourhood and sent your kids to a more.....diversified school instead of that ritzy one in St. Albert or The Glebe (but I understand and support your desire to have the best for your family so no judgement here). But..... they are taking a gamble on a big housing loss by buying in a big neighbourhood.

Its wholly unfair though, for the soldier who has to get in over his head simply to have a roof over his family's head, to lose four figures on a move. That soldier should not be punished for being ordered to a new posting. The challenge though, is how to deal with it? We all know that any policy put in place to alleviate the legitimate pain of that small percentage of cases that need help - will quickly become an entitlement that every greedy member wants access to. Look at IR as the perfect example - a planned one-year benefit to allow you to deal with a temporary major family circumstance, that quickly became the default setting on posting. Yes it kept some people in the CF who would otherwise have quit......but holy abuse Batman!!!

This is why there are such stringent rules imposed by T-Board. To ensure that ONLY those who truly need help, get help (ie. the Windsor family). But what do we do when the overall Canadian housing bubble bursts? The Economist magazine says Canada has the most inflated housing market in the Western world!!! What happens when the market drops by 20% or more and all Canadians are losing money?? Do CF members get reimbursed while civilians lose their shirts? My answer.....yes, they had better.  Because the average civilian, as hard as some of them have it, has a choice to move, and usually moves to better their circumstance.  Military personnel are moved because the system has determined that they can better serve their country in a different location. That is a unique circumstance that requires a unique set of regulations to administer those pers who are working on behalf of Canadians at the pleasure of the government.

But I'm not sure how it would play in the Globe and Mail if CF members who lose on housing get massive payouts while auto plants shut down in Windsor and Oshawa etc, and civilian Canadians lose their shirts. It may be a "benefit too far". But, the strict application of reasonable and considered guidelines will ensure we are paying out to the right people.

However I think the T-Board's view is that the member could always cut back on middle-class niceties that are, after all, not an entitlement, and would thus be quite hesitant to reimburse us for losses.

FWIW, how the market affected me:  I'm a debt-free LCol who dumped his home equity into GIC's and has been renting for the past 3 years, because of volatility in the Alberta housing market and in anticipation of a drop in housing prices. I was hoping to avoid the six figure losses some of my friends have incurred (although others have profited 6 figures - all depends on timing). In retrospect I would likely have broken even over the past 2 years in Edmonton, as the market is roughly where it was when I came here. I'm probably out of pocket $4K  - $7K of "lost" capital growth had I been paying a mortgage and sold at zero profit/zero loss (made some cash on the GIC's, have lower rental cost than ownership costs since I don't pay taxes or utilities or furnace repair etc). I am happy with my gamble, and I don't have to fret over a home-sale when I get posted out. But if a guy with my salary is scared of the housing market, I really feel for NCMs with a bigger family or a wife who doesn't work. Ugly times, so have sympathy for the ones who are losing their shirts, as its not always their fault.

Thank you for your comments.  A few points on your post.  Of the three individuals I am aware of with significant losses (>$50,000), all occurred in rural areas, one local school (aside from the home for wayward youth and three correctional facilities) and far from excessive homes.  Further, I do not believe that 100% HEA out of Core can be linked in any way with excessive benefits (or abuse of) as you discussed with the IR.  This is a benefit to assist those who are disadvantaged, due to their posting  (as you stated).  The critical fact that TB has not declared ANY areas of Canada as depressed markets, and that TB is not reviewing ANY files to consider them as depressed markets leaves the impression that this is a shell policy.

And I agree that your plan of investing and renting during these turbulent housing times is ideal, however renting is not always an option.  Specifically, in my case where family size precludes us from a PMQ or civilian rental unit (at destination or origin).

So, if its a shell policy, what about the following promises made to the soldiers?

CANFORGEN 078/10 2010 Canadian Forces Integrated Relocation Program (CF IRP) indicates that:

(1) CF IRP policy should “meet the evolving needs of CF personnel”;

(2) “the intent of the policy is to ensure that personnel are not required to pay for expenses that ought to get assumed by the CF”; and

(3) “I wish to reconfirm that there is ample scope within the CF Relocation Program to reimburse personnel for the majority of expenses incurred during a move”. 

CANFORGEN 130/09 excerpts read as follows:

(1) “There is a perception that benefits have been reduced as opposed to enhanced”;

(2) “…The Treasury Board Relocation Policy in the Middle of a period of government restraint has left the impression that saving money on relocation costs at the expense of CF personnel and their families is the primary objective.  This is absolutely not the case.  You can still apply to the Directorate of Compensation Benefits Administration for special consideration.  In short, the policy was designed to ensure YOU DO NOT GO OUT OF POCKET FOR EXPENSES THAT ARE THE RESPONSIBILITY OF THE CF”.

National Defence had issued Strategic Human Resources Principle as follows: 

(1) ``We honour the social contact with our people by taking care of their support needs and by trying to satisfy their work and career expectations``

(2) ``The Government of Canada expects DND and the CF to maintain the mobility and morale of its military personnel in order to effectively perform identified missions, while at the same time ensuring that accommodations support programs are managed prudently and on a sustainable basis``;

(3) ``Residential accommodation support programs for all CF members must be responsive to emerging needs.  The programs must keep pace with future force structure and posture that will continue to evolve in response to new mission requirements, new military doctrine, uncertain manning levels, technological change and the constant fiscal pressures on the Defence Services Program.``

The Chief Review Services Audit of Military Moves (2007) recommended that:

(1) “Analysis must be based on accurate, comprehensive information, and must consider not only cost implications, but also impact on operations and member quality of life”.

The Canadian Forces and the Canadian Forces Housing Agency have rental accommodations for some military members.  A guiding paper was published entitled “Accommodation in support of the Canadian Forces: A Vision for 2020” .    Specifically:

(1) “Accommodation is an essential element in maintaining the morale of CF members and thus contributes to operational effectiveness.  More importantly, Accommodation 2020 is a commitment by the Department and the Canadian Forces that our personnel will be able to secure suitable accommodation wherever we may require them to serve”;

(2) There is a social contract and therefore an expectation, that the entitlements denoted in policies and directives to support our soldiers are attainable.  “DND is committed to ensuring that CF members are able to secure accommodation which is suitable to personal circumstances, in a timely fashion and at any location where duty demands”;

(3) “Accommodation is also a basic human support need that must be met as part of the modern social contract with our people;” and

(4) “Accommodation Principles:  Canadian Forces members must be able to secure accommodation that is suitable and available.  When access to suitable or available accommodation is denied or constrained, DND and the CF are prepared to intervene to maintain the mobility of CF members”.  Further, “Canadian Forces members must be able to secure residential accommodation that is appropriate to their household and consistent with Canadian societal norms.”

DAOD 5044-1 identifies the Canadian Forces Commitment to Families, specifically the overarching principles as they relate to 100% HEA out of core.  None of these commitments has been met:

(1) “Canadian Forces Commitment - The CF will:
i. provide services for the well-being of CF members and  their families;
ii. assist in reducing the impact created by frequent postings on the social and educational integration and stability of CF members and their families;
iii. take measures (through the CF family network) to reduce the impact of long and frequent periods of family separation; and
iv. take measures to facilitate families securing accommodation which is suitable to personal circumstances, in a timely fashion and at any location where duty demands.”


Based on the principles, promises and direction promulgated to Canadian Forces personnel by leadership, the criteria within an approved policy (HEA) would be validation enough to claim reimbursement. 

Who is going to make TB accountable for their policy (even if they have a reduced budget this year)?

 

[clericalchronicals]

Seeing all this chat on the HEA has made me wonder, how many people have been hit by the charming Interest Rate Differential policy?  I know for myself, when I was posted out of Halifax and couldn't purchase in the new location (because housing costs were out of this world) I was subject to pay a $28,000 penalty and received a lovely $9,000 back using all three envelopes (which totally cleaned out my personalized).  Three months from Core, Custom and the entire Personalized envelope...still left me with my hands in my pockets for a stinging $19,000 to borrow from the bank...just to close my house.

Any thoughts???

 

[Maritimegal]

Log O: Thanks for your comments, but I disagree with your view  that only those who sold and were unaware that they would be not be reimbursed their losses are the only ones that should receive compensation. As someone whose husband has been on IR for the past year because we could not sell our house last year (despite listing at a huge loss), I am just as disadvantaged. Were relisting our house this year and if we sell will still take a large loss. A loss that would NOT have occurred had we not been posted here in 2007. I'm glad you were fortunate to find a place to rent 3 years ago, but we were not as lucky. We were not able to find anything nor could we get a PMQ. We live in a rural community and trust me we our living standards are not high.

My husband cannot remain on IR forever because: 1) it's abusing the system, and 2) it's completely horrible for family life. Renting out a home is risky business unless you have a nest egg to cover future issues that could arise with tenants. Since we chose to list our home last year, we are not entitled to the real estate agent fee in lieu of selling.  Despite knowing full well that we may never be reimbursed HEA, we are running out of options to ensure we don't lose the shirts off our backs.

 

[QM]

Hi Maritimegal. Your situation sounds awful and I think you are one of the families who should qualify for full reimbursement. Treasury Board would likely have some policy re-writing to do, before that was the case, but I hope you are able to challenge current policies and I hope it comes out in your favour.  No soldier and no soldier's family should be so ill-treated.

I didn't think I had said I was of the view that only those who sold and were unaware that they would not be reimbursed their losses, should be the only ones that should receive compensation. Not sure where that perception came from but that's fine!

I posted my personal circumstances only to contribute to the discussion by showing how I coped with the ridiculous housing situation in much of Canada. I didn't intend to imply that such an approach is a viable solution for everyone, not by any means. Certainly there is a very limited rental market for family-sized dwellings, which is even more limited in rural areas.  My lifestyle supports me being in a condo right downtown - a location certainly unsuitable for many military members.

I truly hope your siutation works out. I would also hope your husband's chain of command would be willing to help him craft any written challenges he may wish to submit, to attempt to change the system. Good luck!!

 

[Maritimegal]

Log O. My apologies. My comment was in response to Capt Loadie's comment made above. Typo on my part.

 

[momtoprincesses]

We're there with you.... thankfully we did manage to walk away from the house but we took a 5-digit loss, wrote off all improvements to the property and had to go begging to the bank for mercy on the IRD penalty.  We have a grievance filed which is with IA now on an extension.  It's been months but we're waiting it out.  We did massive amounts of homework and did literally submit a three-inch binder of information.  What will come of it?  Who knows.....  the basis for the grievance is that the policy says you have to demonstrate the depressed market condition with the assistance of your realtor, but the policy is not being applied.  As you can see, the automatic response is that "there are no depressed markets in Canada".

We're also struggling to recover from some significant misinformation provided by IRP... the latest being that we were told we could claim the loss on our house as a tax deduction to offset the taxable benefit of the HEA we received.... NOT!!!  However, after talking to CRA today I did find out that we CAN claim up to $5,000 of the costs associated with maintaining our empty house (after we moved here on the promise of TDRA benefits that were later cut off and clawed back... a whole different story...)

Re: the question about IRD penalties.  IRP will not pay it for you.  We were successful in negotiating the penalty by going to the president's office of our bank's chain.  In the future, though, the way to avoid this penalty is to take out a short-term variable-rate mortgage (1-3 year term, no more).  A variable-rate mortgage is exempt from that penalty.

 

[aesop081]

We're also struggling to recover from some significant misinformation provided by IRP... the latest being that we were told we could claim the loss on our house as a tax deduction to offset the taxable benefit of the HEA we received.... NOT!!! 

Why on earth did you take tax advice from IRP  ???

 

[momtoprincesses]

It was our first posting, so naive optimism, perhaps?  Belief that the professionals knew what they were talking about?  Who knows... but we've learned a lot through the experience, at least.  So it's all good in one way or another and equips us better for the future, and we've been able to steer a couple of friends away from disaster.  So it's not a total loss.

 

[George Wallace]

I find it interesting that one or two posters here have the impression that if they put $20K worth of work into their home in the way of renovations, etc. that they should recoup all that money as well.  In fact, there are very few improvements that one can do to their home that will guarantee a hundred per cent return for their expenditure.  I am not saying that it will not increase the value of your property, only that it will not increase the value by the same amount as your Reno costs. 

 

[TimBit]

Second that, the delta between what you paid and what you recoup is supposed to represent extra enjoyement of your home.

 

[acooper]

@George - I hope you're not referring to my post with regards to "Expecting all the money we put in back". I don't expect to get it ALL back. It would be nice, though, to get SOMETHING to help us get back to appraised value. No way would we have tried to sell right now, except for my husband joining the Army. Windsor's real estate market is horrible for sellers right now.

And I guess, if there was no policy on HEA, well, then we get what we get, right? But if there's a policy, it needs to be followed and applied appropriately. Doesn't really sound like this is happening, but we'll see what happens when we get our paperwork filed. I firmly believe that if there's a depressed market in Canada, it would be in Windsor!

 

[tree hugger]

There's a show on HGTV called "Bang for your Buck".  It's premise is that the owners invest x amount in renovations and a designer and real estate agent determine the expected return on the investment.