Home Equity Assistance

100% Home Equity Assistance in CFIRP

CAF Ombudsman Concerns on Home Equity Assistance Administration

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2013 November:

On the Homefront: Assessing the Well-being of Canada’s Military Families in the New Millennium[1]

[1] http://www.ombudsman.forces.gc.ca/en/ombudsman-reports-stats-investigations-military-families/military-families.page

The Home Equity Assistance Program provides financial assistance to members and their families when selling their principal residence. CF members who sell their home at a loss are entitled to reimbursement up to 80 percent of the difference between the original purchase price and the sale price, up to a maximum of $15,000. A loss in excess of $15,000 (and up to 100 percent) may be reimbursed in places designated as “depressed markets” areas as defined by the Treasury Board Secretariat. The major criterion for a “depressed market” is real estate values in a specific market having dropped by 20 percent or more during the concerned timeframe. There are currently no Canadian markets deemed to meet the 20 percent criteria.

There are several concerns with this program. The policy itself is vague, and the criterion is too onerous. The relevance of the all-important 20 percent threshold employed is unclear and not explained in the policy. The $15,000 maximum payment has remained the same since the program’s inception in 1998 despite consistently rising real estate values. According to the Canada Mortgage and Housing Corporation, at that time $15,000 equalled approximately 10 percent of the average house value. Today, the average home price in Canada is closer to $325,000. As such, $15,000 limit represents a considerably lesser percentage of home value than it did in 1998. Consequently, CF families can still incur a loss of several thousand dollars, even when they are eligible to benefit from the Home Equity Assistance Program, and many do.
The documentation required to justify a “depressed market” is voluminous and complex. Moreover, the involvement of a realtor in the process, whose priority is to sell homes and not facilitate claims, is often unrealistic. The overwhelming majority of members and their families who complete and submit a claim for 100 percent reimbursement through the Treasury Board Secretariat have their claim eventually denied. According to Director Compensation and Benefits Administration figures, from July 2008 through to January 2013, 118 applications were submitted for losses greater than $15,000. [207] Of those applications, the total number decided on by the Treasury Board Secretariat (as opposed to the Director Compensation and Benefits Administration) is unclear. This is because, in some instances, Home Equity Assistance claims are reimbursed fully for losses above $15,000 without being forwarded to the Treasury Board Secretariat for consideration. Depending on the reimbursement claimed, or on whether the sale price is below or at 95 percent of the appraised value, losses up to 100 percent may be reimbursed through three funding envelopes available to the CF member, provided these are not exhausted as a function of other expenses incurred as part of the posting. If there are sufficient funds to cover the entire loss claimed, all envelopes may be used to reimburse the member directly by the CF’s moving Agency, or by the Director Compensation and Benefits Administration. What is clear is that since 2008, the Treasury Board Secretariat had approved only two Home Equity Assistance claim files, both in 2011.
Unfortunately, many families discover too late that this benefit is subject to stringent conditions and thus applied on an exceptional basis only. The restrictive application of this benefit is not specified or referred to in policy and therefore not understood until a military family faces a loss on a home sale. This creates a false expectation in the minds of many families that this program protects them in the event of having to sell at a loss.

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Written by Major Marcus Brauer

February 22, 2015 at 15:22

Posted in Uncategorized

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