Archive for July, 2013
Two legislators — one in the House and one in the Senate — have introduced a bill to prohibit housing and employment discrimination against military servicemembers. The bill would add serving military to the list of federally-protected classes. Current law prohibits housing and employment discrimination on the basis of race, color, religion, national origin, reed, sex, disability or familial status. There is no federal law prohibiting discrimination against active military for housing or employment. The Uniformed Services Employment and Re-employment Rights Act (USERRA) prohibits employers from discriminating against reserve component military, but does not prohibit employers from screening out job applicants who are also on active duty. Some states, however, do prohibit housing and/or employment discrimination against active duty military.
The new bill, entitled the Veterans and Servicemembers Employment Rights and Housing Act of 2013, was introduced by Congressman Derek Kilmer (D – Washington) and Senator Richard Blumenthal (D – Connecticut).
Blumenthal is a veteran of the Marine Reserve, but also falsely claimed that he had served in Vietnam according to the New York Times. Kilmer is not a veteran.
The bill seeks to address an unintended consequence of the Soldiers and Sailors Civil Relief Act, or SSCRA. The Act allows servicemembers to break leases without notice if they receive military orders that force them to move elsewhere. When a landlord leases an apartment to a servicemember, they take a risk that the servicemember will break the lease early – leaving the landlord with an unrented apartment. Active-duty military cannot be readily evicted while deployed, either, without special permission from a magistrate. Landlords would much rather have a solid tenant live out the full terms of the lease. Some therefore avoid leasing to servicemembers. “Why on earth rent to active duty military?” posed one member of a landlord discussion forum. The proposed law would eliminate that practice, and expose landlords found to have practiced discrimination on the basis of military service to civil penalties and possible fines.
Employers also discriminate against hiring active duty military seeking part-time employment because they are frequently called away, occasionally on short-notice, which can put employers in a bind.
If signed into law, veterans and service members facing employment discrimination could appeal their grievances to the Equal Employment Opportunity Commission. Furthermore, the law would amend the Fair Housing Act would to add military status as a protected class for service members or veterans who want to rent or purchase a home. The bill protects not just active-duty servicemembers on Title 10 orders, but also Guardsmen serving under Title 32.
The full text of the House version of the bill can be read here.
The bill has the support of a number of veterans’ organizations, including the Veterans of Foreign Wars and the National Guard Association.
Senator Blumenthal is a veteran of the Marine Reserve, but also falsely claimed that he had served in Vietnam according to the New York Times. Representative Kilmer is not a veteran.
The bill was first introduced into the House on Thursday, 11 July. Thus far, the House version has four sponsors: Kilmer, who introduced it, as well as Democrats Matthew Cartwright (Pennsylvania), Tammy Duckworth (Illinois) and Charlie Rangel (New York). One Republican, James Renacci of Ohio, has also signed up as a cosponsor.
The Senate version of the bill has no co-sponsors as of yet.
The U.S. Air Force pulled a sexual assault prevention and response brochure this week – because it simply stated the obvious. The brochure, which was originally locally distributed to airmen at a base in North Carolina, came under fire from Representative Louise Slaughter (D-NY), who singled out a passage that read:
“If you are attacked, it may be advisable to submit than to resist. You have to make this decision based on circumstances. Be especially careful if the attack has a weapon.”
Disregarding the grammatical issues, the passage, as originally written, is correct. Furthermore, it is obviously correct, and any four-year-old child could reach the same conclusion. Resistance is not a rational course of action in every case. If there are multiple armed attackers, for example, or if the victim is also responsible for the life of a small child who would be endangered she resists, or if the attacker already has such a jump on her and there is such an imbalance of strength or leverage that resistance would be hopeless, but simply invite further violence, severe injury at the hands of a sadistic psychopath, or death, then submitting until the situation changes may very well offer the best chance of survival against a violent and determined attack.
Indeed, violent criminals frequently choose to target the place and time of their attacks precisely because they can make active resistance a non-option for any rational victim. Resisting an assault attempt of a drunk “friend” is a very different decision than resisting a violent stranger with a knife to the throat or a gun to the head, or to a child’s head.
Not every rapist conforms to Representative Slaughter’s assumptions concerning his modus operandi or motive. Some are easily deterred by resistance, and some will be simply emboldened to new heights of rage or cruelty. Only the victim in this case – the person on the scene – can make the decision whether to resist in hopes of escape or to submit in hopes of survival.
This is elementary – and well-known to criminologists. So it takes a lot of nerve to question it, or to try to second-guess the decisions made in real-time by victims of attack.
Unfortunately for the country, Representative Slaughter has that nerve. Indeed, not only does she object to the simple truth written in the pamphlet; she characterized the pamphlet’s accurate and reasonable advice as “shockingly offensive and inappropriate.”
In a letter to the Secretary of Defense, Rep. Slaughter wrote, “Attached is a partial copy of the brochure from Shaw Air Force Base which contains multiple victim-blaming and inappropriate messages regarding sexual assault. Please review all the materials that your office uses, and employ the assistance of outside experts in sexual assault prevention and treatment in your efforts to ensure that the appropriate messages about sexual assault prevention and response are being provided to all servicewomen and men. We cannot perpetuate the myths of sexual assault and expect to see real change in the prevalence of such events at the same time.”
It is not clear to which of the crime prevention and coping techniques in the pamphlet Rep. Slaughter was referring. I read the pamphlet as published by her staff on her own Website, and wasn’t able to find a single sentence that could remotely be construed as “victim blaming” or “perpetuating the myths of sexual assault.”
The Department of Defense groveled to her when it responded, not by defending their reasonable pamphlet on the merits, but by simply withdrawing it from circulation. Because it is somehow preferable for female airmen stationed at Shaw to have no written guidelines or advice on how to protect themselves from sexual assault than to have access to this document.
“No service member wearing the uniform of the United States military should ever be told `it may be advisable to submit than to resist’ in the case of a sexual assault,” Slaughter said in a separate statement, though without any argument to advance her ridiculous assertion. “I am cautiously optimistic about the Pentagon’s agreement to review all sexual assault prevention materials. We have to change the military culture if we want to stop this epidemic of sexual assault, and this response is a step in the right direction and a small victory for victims.”
Aside from being an insult to every rape or assault victim who felt she could not resist without risking more severe injury or death (Does Rep. Slaughter believe such a woman is somehow less because she made a judgment call that allowed her to survive?) Slaughter’s statement is so ill-thought-out and absurd that one is hard-pressed to believe it came from an adult mind. The obvious point of the passage was to give advice to those who may become victimized should efforts at prevention fail. Even if the DoD were somehow successful at eliminating sexual assaults on the part of servicemembers entirely, not every female servicemember who is attacked is attacked by another servicemember. This, too, is glaringly simple to grasp.
What is not so easy to grasp is why a member of Congress with no particular expertise in military affairs has so much time on her hands that she can concern herself with the micromanagement of the tiniest minutiae of the management of an Air Force Base not even in her district.
It’s also unclear why it is the Air Force knuckled under to this kind of ignorant PC meddling from someone who has such a casual relationship with truth and who obviously doesn’t think very hard.
Then again, considering the fact that the Air Force just went through an exercise confiscating copies of Men’s Fitness magazine and images of WWII nose art because they may be offensive to women, the cravenness of Air Force officials, cowed by purveyors of political correctness beyond reason or parody, is becoming more predictable, if not more rational.
As deep cuts in defense spending continue to take hold, the Secretary of Defense has notified Congress that the DoD will be forced to take some draconian measures come fiscal year 2014.
With an ongoing war in Afghanistan, the Secretary of Defense must find an additional $52 billion in cuts to make, hopefully without harming the war effort. As part of that plan, the Secretary of Defense told Congress, through a letter, that the combination of cutbacks could include some items that are deeply painful for military servicemembers and their families. For example, the Secretary said cuts could include:
- A freeze on all promotions
- A freeze on permanent-change-of-station moves
- A continued freeze on civilian hiring
- Halting all discretionary bonuses, such as reenlistment bonuses
- Stop taking in recruits
- 20 percent reductions in procurement, construction and R&D
Secretary Hagel sent the letter to Senators Carl Levin (D-Michigan) and James Inhofe (R – Oklahoma). The Senators had asked the Secretary to lay out the effects that planned budget rollbacks and sequestration measures would have on military personnel and readiness.
Hagel also said the DoD would be forced to make deep cuts to weapons programs and put off needed facilities and infrastructure maintenance. However, the law does not allow the DoD to shut down unneeded posts.
Hagel also called for caps on military pay increases, and increases in TRICARE fees for retirees.
The Secretary also said that if sequestration remains in effect as it currently stands, there would possibly be a round of involuntary discharges.
All told, unless Congress takes action, the Department of Defense must find over half a trillion dollars in savings vis. Previously planned baseline spending over the next 10 years – while at the same time successfully prosecuting the Afghanistan war and satisfying its normal peacetime missions such as guarding key shipping lanes and deterring aggression from rival nations such as China, Russia, Iran and North Korea.
However, the funds specifically allocated to support the Afghanistan warfighing mission have thus far been protected from sequester.
Secretary Hagel would also like to eliminate unneeded bases, ships and weapons. However, this is always an uphill battle for the Department of Defense, because every unneeded program is all too often some Congressperson’s pet project.
In an appearance on the CNN Sunday talk show State of the Union, Chairman of the Joint Chiefs of Staff General Martin Dempsey reiterated opposition to calls from some in Congress to take the responsibility for sexual harassment and assault investigations out of the hands of commanders.
The General said that the military has been able to solve severe disciplinary problems in past generations – including race riots in the barracks and an epidemic of drug abuse in the ranks – that seemed unsolvable at the time. “We didn’t do it with the exclusion of the commander,” said Dempsey, himself a veteran of the 1970s Army. “We did it by making the commander take responsibility.”
The General was referring to proposals like those of Kristin Gillebrand (D-NY) and Tammy Duckworth (D-IL) which would have stripped unit commanders of discretion over whether sexual assault or harassment cases should go to trial, and instead delegating that authority to experienced military lawyers in special offices. These attorneys, according to Gillebrand’s proposal, would hold 0-6 rank or higher.
Well, this ought to go over great with the locals.
The U.S. military held an officially-sanctioned “gay pride” event at the U.S. base and airfield at Kandahar, Afghanistan.
That’s correct: In a deployment environment where U.S. troops can’t visibly display a cross or crucifix, and the Star of David is right out, where we can’t even mention Israel, and where pornography is prohibited out of regard for local sensibilities, the Department of Defense was A-OK with a gay pride event.
Oh, and it wasn’t something that was held, discreetly, in private for the benefit of troops deployed. Rather, the Armed Forces News Service made a video press release, bragging about what a cool thing it was, in hopes that the commercial media would pick it up and run with it.
Former Florida Congressman and Iraq War veteran Allen West is not impressed. “I’m confused” tweeted West, “@BarackObama what is the mission of the military under ur command?”
— Allen West (@AllenWest) July 6, 2013
West also released a more extensive statement via his Facebook page:
Ok, let me get this right, our deployed Troops are counseled about displaying their Christian faith and told to be culturally sensitive to Muslims by not speaking of Christianity or openly showing bibles…but we can have an LGBT pride event at Kandahar (where I was stationed for two years). We are all upside down and silly me I thought that pride came in simply being called Soldier, Sailor, Airman, Marine, or Coast Guardsman (oops, that’s not even PC gender correct). I am seriously confused. Can someone please explain what is the mission of the US Armed Forces under the direction of the Obama administration?
Meanwhile, the DoD appears to be granting pro-gay demonstrators special dispensation to ignore the longstanding UCMJ prohibition against servicemembers marching for or against controversial political measures while in uniform. The Department of Defense granted approval for servicemembers to march in this months San Diego Gay Pride event, in uniform.
However, DoD Directive 1344-10 is still in place, which states that servicemembers may:
- Attend partisan and nonpartisan political fundraising activities, meetings, rallies, debates, conventions, or activities as a spectator when not in uniform and when no inference or appearance of official sponsorship, approval, or endorsement can reasonably be drawn. (emphasis added).
The DoD directive goes on to state that members of the Armed Forces while on active duty shall not:
- Participate in partisan political fundraising activities (except as permitted in subparagraph 22.214.171.124.), rallies, conventions (including making speeches in the course thereof), management of campaigns, or debates, either on one’s own behalf or on that of another, without respect to uniform or inference or appearance of official sponsorship, approval, or endorsement. Participation includes more than mere attendance as a spectator.
- March or ride in a partisan political parade.
- Activities not expressly prohibited may be contrary to the spirit and intent of this Directive. Any activity that may be reasonably viewed as directly or indirectly associating the Department of Defense or the Department of Homeland Security (in the case of the Coast Guard) or any component of these Departments with a partisan political activity or is otherwise contrary to the spirit and intention of this Directive shall be avoided.
It is difficult to imagine the Defense Department authorizing troops to march in Tea Party rallies or pro-life rallies (or pro-choice rallies, for that matter), while in uniform.
Ready, Fire, Aim!!! Secretary of Defense Has No Idea What Expanding Benefits to Same-Sex Partners Will Cost DoDPosted by Jason Van Steenwyk
Just a few months ago, Secretary of Defense Chuck Hagel and his predecessor Leon Panetta were pounding the table for TRICARE fee increases and pension reforms, arguing that over time, personnel costs would overwhelm the DoD.
Now the Secretary of Defense, having supported the repeal of the Defense of Marriage Act, has pledged to make the full range of lucrative benefits available to same-sex spouses of service members that are available to heterosexual married couples. These benefits range from the widely understood Tricare health insurance benefit to qualification for military housing, a significantly higher housing allowance (BAH Type II), free PCS moves and family separation pay.
So what’s this going to cost?
Well, the Secretary of Defense doesn’t know. Having advocated the policy change, the Administration had no idea what the fiscal effect on the Department of Defense was going to be.
The concern over the significant cost burden of paying benefits to the families of servicemembers is not new. In the early 1990s, then Commandant of the Marine Corps, General Carl Mundy, proposed saving money by prohibiting married individuals from joining the Marine Corps. This policy would have echoed the military practice of prior generations: In the 1950s, anyone below sergeant in the Army required the company commander’s permission before getting married.
As it stands now, the DoD estimates that there are about 17,000 military members with same-sex partners in marriages recognized by at least one state. That’s about a division equivalent.
You’d think that with the repeal of DOMA on the horizon for years, that the DoD or the Administration would at least come up with a ballpark budget-impact estimate. After all, local commands in the Reserve component have to come up with a cost-estimate worksheet just to hire a few people for a week to help prepare for an inspection.
The DoD, however, will apparently be blindsided by the cost of their own favored policy.
However, any cost estimate would have to include the difficult-to-predict impact that human responses to incentives will create. For example, how many gay troops over and above the 17,000 estimated will now get married in order to collect military benefits? Are there others who have not been identified? If the 17,000 estimate is low, then costs will be higher than projected. If they bothered to project them in the first place.
Will we see healthy partners of HIV-positive individuals join the military to give their partners access to Tricare benefits, and what will that cost? Will we see retired servicemembers come out and enroll their partners? Will we see same sex roommates engaging in sham marriages to get a higher BAH payout? How will we police that? Or will we?
A big part of the budget impact of the expansion of military benefits will have to do with how the DoD (and to a lesser extent, the Veterans Administration) defines what will and what will not count as a marriage for the purposes of DEERs enrollment. For example, will the DoD grant benefits to those servicemembers in domestic partnerships that aren’t formally marriages? If it does, will it grant the same benefits to heterosexuals in domestic partnerships? Will the state laws governing same-sex marriages have any bearing on the status of marriages within that state? How will the DoD treat servicemembers wishing to marry in states that do not recognize same-sex marriages? Will same-sex partners still have to show marriage certificates as heterosexual couples do in order to qualify?
The Broader Picture
To be fair, there are some early indications that the repeal of DOMA will cause a net increase in federal revenue, because of the marriage tax penalty that will be imposed upon married same-sex couples, and because married couples with combined incomes would be less likely to qualify for public assistance programs than two unmarried individuals with separate incomes. The Congressional Budget Office concluded in 2004 that same-sex marriage would have the effect of actually decreasing the federal deficit, because of these effects. However, this would not benefit the Department of Defense directly. To pay for these benefits, the DoD has a few options:
- Slash benefits across the board for all families to pay for the at least 17,000 new partners and counting.
- Increase TRICARE fees.
- Cut operational, maintenance, physical plant and spare parts budgets
- Cut a couple more brigade combat teams, ships, or aircraft programs or some combination of the three.
These cost saving measures are already well underway – prompted by the twin engines of a natural post-war cyclical drawdown and the additional requirements of sequestration. The DoD is already complaining that the sequestration requirements will force them to cut bone. The additional benefits paid will force further cuts in an already austere fiscal environment for the U.S. military.
Prior to the Iraq war, which required large mobilizations of brigade-sized Guard formations and significant support capability from the Army Reserves, the “one Army” concept received little more than lip service. In 2003, when the Army wanted to mobilize extra light infantry for the Iraq invasion, they called up the 53rd Infantry Brigade, an enhanced readiness brigade out of Florida. They didn’t want the brigade, though. Separate Guard brigades come with politically connected general officers and staffs that have allegiance primarily to their governors rather than to Big Army.
The Army then broke up the brigade, and even broke up battalions, initially, committing them piecemeal, and denying deployed Guard soldiers access to promotion opportunities, cross-transfers to facilitate promotions, needed service schools and even initially denied Guard soldiers in the heart of Ramadi the enhanced Kevlar vests routinely issued to soldiers in the active component. (Disclosure: The author was a member of the 1/124th Infantry, 53rd Infantry Brigade (Separate) and was deployed to Iraq in 2003 and witnessed these events firsthand).
As the war dragged on, and the insurgency gained strength and demonstrated resiliency, it was obvious that the active Army was not going to be able to sustain the fight with the number of active brigade combat teams on hand. And so the long, hard slog began for citizen soldiers, many of whom endured multiple combat tours as members of National Guard and Reserve units.
Unlike the Gulf War in 1991, in which some reserve component Army units were reported to have had trouble qualifying for deployment (some in the Army have long suspected that the active component doctored the predeployment training to preserve slots and career opportunities for themselves), the reserve component rose to the challenge in Iraq. The older and more experienced Guard infantry units and their counterparts in the Marine Reserves proved ideal for the counterinsurgency environment, since their advantage in age, experience and their mix of civilian job skills became combat multipliers in many areas in Iraq.
Guardsmen and reservists have also taken pride in their own accomplishments, and at being finally seen as a full partner in the fight, rather than as the forgotten stepchildren of the ringknockers (Academy graduates) and the active component.
Now that the Army is going through a cyclical drawdown, however, we are starting to see some flashpoints as the Army Reserves, the National Guard Bureau, the states themselves, and the active component jockey for positioning – and ultimately, jobs preservation for themselves.
One such flashpoint came to a head this spring: A unit from Indiana had received notice that it would be deployed later this year. Unit members then arranged their affairs accordingly: They didn’t renew leases, they didn’t apply for financial aid or enroll in school programs, they caused their civilian employers disruption while the employers prepared and crosstrained individuals in anticipation of their extended absence. And then the unit had the deployment canceled, with two of the four directly affected units just six weeks away from deployment. The mission wasn’t canceled – the Department of Defense simply took the mission away from the Guard unit and gave it to an active duty unit from the 1st Cavalry Division in a process called “offramping.”
The active component says they did it to save money. It doesn’t make much sense to the taxpayer, of course, to pay an active duty unit to sit around stateside while also paying a Guard unit to go overseas and do the mission. But Guardsmen also cried ‘foul,’ as well – pointing to the significant disruptions that their soldiers and their families went through preparing for the deployment.
The National Guard has a lot of friends in Congress, though – and Indiana was no exception. Senator Joe Donnelly of Indiana objected to what happened to his constituent soldiers, and introduced language into the Defense Authorization bill to prohibit the military from offramping reserve component deployments within 180 days of the scheduled deployment without the personal approval of the Secretary of Defense.
Donnelly said in a statement: “My first amendment on limiting the cancellation of reserve component deployments would detail the experience of more than one thousand Indiana families affected by the off-ramping, or cancelled deployment, of four Indiana National Guard units, two of which were just six weeks away from deploying. The Army replaced these units with active duty units, and I am grateful that the Committee has included a provision to limit these short-fuse cancellations. The decision had wide-ranging impacts on over 1,000 families’ health care, financial decision, educational plans, and housing. Moreover, these units were placed at the bottom of rotation for future deployments, and have lost a year of eligibility for deployment. This has had an incredible impact on morale, retention and training, and—simply put—it’s not the way the Army should treat its soldiers.”
In contrast, in 2008, lawmakers in Vermont unsuccessfully sought to rescind the President and Secretary of Defense’s authority to mobilize Vermont National Guard troops in support of Operation Iraqi Freedom.
“The mission authorized in 2002 does not exist,” said State Rep. Michael Fisher (D-VT), who plans to introduce a bill backed by 30 colleagues Wednesday that calls on Gov. Jim Douglas to join the effort. “Unless Congress grants a new authorization, the Vermont Guard should revert back to state control.”
Meanwhile, National Guard supporters – backed by the powerful National Guard Association of the U.S., – is advancing the argument that keeping units, capabilities, missions and soldiers in the Guard, versus active duty, will allow the Army to keep capabilities at a fraction of the cost per soldier, saving the taxpayer billions of dollars in a time of austerity. The active component has just announced plans to slash 13 brigade combat teams. But half of the combat arms formations in the total Army are in the Guard. The National Guard and active army are battling before the Congressional appropriations committees for the bigger slice of the post-drawdown pie.
So far, the active component has been on the chopping block.
Some Guard leaders are actually developing arguments to strengthen Guard end strength, despite the budget constraints. Major General Wesley Craig, the adjutant general of the Pennsylvania National Guard, wrote an article in National Guard Magazine, saying,
The Army chief of staff has recommended the force stabilize at a total end-
strength of 1,045,000 soldiers—490,000 in the active component and 555,000
in the reserve components. Any further reductions should be proportional, reducing all components and capabilities by the same percentage.
But why settle for a smaller Total Army when there is another way?
The recent report of the Reserve Forces Policy Board on personnel costs provides the basis for a better way forward. We can maintain the million-man Army at a lower cost by simply adjusting the AC/RC mix.
The basic arithmetic is simple. According to the report, cutting 100,000 troops from the active component would save $21.8 billion. Increasing the reserve components by 100,000 would cost $6.1 billion. The final savings would be $15.7 billion annually with no loss in Total Army end-strength.
This would be a paradigm cultural shift for Army senior leaders who have spent their adult lives in a force with a large active component.
The two competing proposals illustrate the profound difference between the two components. The current Chief of Staff of the Army, General Raymond Odierno, is a 1976 graduate of West Point, and has spent the last 33 years in the Regular Army. Craig was an ROTC graduate from Temple University in 1972, spent two years on active duty and as spent the remainder of his career in the National Guard.
To be fair, Odierno has thus far targeted the active component for almost all the cuts so far. According to Odierno, this makes sense, because it was the active component, not the Guard and Reserve, that was expanded by over 100,000 troops since 9/11. The bulk of the cuts identified have been returning the Army to something close to that baseline. However, as Craig notes, Odierno has indicated that future cuts will likely come from active and reserve forces alike.
According to the Department of Defense, 876,653 men and women have been called to active duty to support the contingency missions since the 9/11 attacks through June 12, 2013. The bulk of these activations have come from the National Guard, which contributed 375,680 soldiers to the war effort, though many of those deployed multiple times. The U.S. Army Reserve mobilized another 211,441 individuals.
The Air National Guard also mobilized over 98,934 airmen, and the Air Force Reserve added another 66,303 men and women. The Marine Corps Reserve has mobilized 62,449 marines. The Coast Guard Reserve added another 8,350 to the war effort, while the Navy Reserve contributed 53,496 sailors.
It’s still very early in the game, but we may well be at the beginning of a cyclical increase in mortgage interest rates. That creates an opportunity for people who own homes with outstanding VA mortgages – and FHA mortgages, too, for that matter. Here’s why:
Mortgage interest rates have been extremely low for quite a while now. They hit their all-time low of just over 3 percent at the end of last year, and brushed against those lows again last spring before starting to edge upwards again.
The Federal Reserve has been seeking to keep mortgage rates very low in order to boost the flagging real estate market and support the sluggish economy. But the housing market experienced a strong price recovery last year that seems to be continuing. This, combined with a slowly improving broader economy, takes a lot of the pressure off of the Federal Reserve to artificially keep rates down. As a result, it is looking increasingly likely that interest rates will continue to rise.
A rising interest rate environment creates an opportunity for VA mortgage holders to exercise one of their rights under the mortgage contract: assumability.
In plain language, assumability means that anyone with a VA loan who wants to sell the house has an option to simply let a new borrower take over the mortgage and keep making payments. They just assume the mortgage – picking up the payments where you leave off.
That doesn’t make very much sense when interest rates are falling. The buyer can typically qualify for a lower rate than the existing loan simply by getting a new mortgage. But when interest rates have been rising, the seller has something very desirable from the buyer’s point of view — comparatively cheap loan. That’s a powerful negotiating point for the seller, and buyers will pay up for it.
Here’s how it works: Suppose you were able to get a 4 percent mortgage last year and finance $200,000 on a house, with nothing down. Your payment on this loan is $954.84 per month. But in a few years you want to move or it’s time to PCS. Meanwhile, mortgage interest rates have increased from 4 percent to 8 percent.
Now, you have a buyer who needs to finance the property. Let’s say he needs to borrow $150,000, with 300 months left on the original 360 month loan. The buyer could go and get his own loan, but he’d have to pay the prevailing loan rate at 8 percent. That means his loan payment would be sharply higher than yours, at $1,157.73.
This is where you say, “Wait a minute, I have a VA loan. It’s assumable. So you can just take over my payments and save $202.89 per month, or $2,434.68 per year!” Obviously this is worth quite a bit of money to they buyer over the remaining 300 months of the loan. In fact, the buyer will save $60,867 over the course of the loan.
Now for a bit of finance theory: Money in hand now is worth more than the promise of money in hand in 300 months. This is the central premise behind a concept called the time value of money. So it’s not exactly worth $60,867 to the buyer to save $60,867 over the life of the loan. But it’s worth a lot more than nothing! And I’m sure you’d rather have that money in your own pockets than in some lender’s!
So here’s what we do: We discount that $60,867 back to the net present value. That’s the value of the proverbial “bird in the hand” as opposed to “two in the bush.” If the prevailing interest rate at the time of the sale is 8 percent (it’s no accident that that’s the same as the prevailing mortgage rates in our scenario!). Saving $202.89 per month is mathematically equivalent to receiving a monthly income of that much (we’re disregarding taxes here, because the IRS only taxes money you receive, not money you save). So using a spreadsheet developed by real estate expert and columnist Jack Guttentag (you can download the spreadsheet at the link), the net present value of the assumption itself at the time of sale would be $49,337.75. This is the theoretical check someone would be willing to write for the certainty of that stream of money for 300 months.
Remember – assuming your mortgage also saves the buyer origination fees, which can add up to two or three thousand dollars on a $150,000 loan. So it’s probably worth it to a forward-thinking buyer to pay up to $52,337.75 dollars extra for the privilege of assuming your mortgage.
Now, you probably won’t get the full amount. You probably want to leave enough on the table for it to be an easy decision for the buyer. You want him to jump at the idea, because that’s more money in your own pocket. Split the difference and have him write a check to you for half the net present value or so, and you have a very easy win-win: You get extra cash now, and the buyer gets a lower monthly mortgage payment for the next 300 months, in our scenario.
Incidentally, the lender typically will not require an appraisal to go forward with an assumed mortgage transaction. That saves about $400 or $500 per home right there.
Naturally, your situation will vary, so be sure to do the math as it applies to your specific situation. The spreadsheet will help.
Now, assumption isn’t automatic. The buyer still has to qualify for the loan. They have to have decent credit, an acceptable debt-to-earnings ratio, and jump through all the normal hurdles to qualify for the loan just as you did.
WARNING: Normally, if a buyer assumes a VA mortgage and doesn’t pay, then you are still on the hook for the outstanding balance. Always, always get the lender to release you, in writing, from responsibility for an assumed mortgage before finalizing your sale. Make any contracts contingent upon either payment in full so you can pay off your own mortgage, or on the formal release of liability from the existing VA or VHA lender.
It’s too early in the interest rate cycle at this writing for there to be very many opportunities for assuming a mortgage to make sense. But as interest rates rise, there well be more and more scenarios where an assumed mortgage is something worth serious consideration.
One last thing to keep in mind is that you can only have one VA loan out at a time. Until the old loan is paid off – whether by you or by the person who assumed the loan – you generally will not be able to qualify for another VA loan. That is, unless the buyer was also a veteran. That buyer can use his or her own entitlement in assuming the loan. This frees your VA loan eligibility up to go buy your new home.
Creditors are in the business of lending money and collecting – with interest. So when payments stop, they’re going to take some steps to try to find you and get you to pay up. Too much money is at stake. And if you owe a creditor $2,000 or $10,000 or more, it’s usually worth a few phone calls or emails to them to get their loan “performing” again.
And generally, the law allows them to contact you, by mail, email, and telephone – within certain limitations. These limitations include restrictions on the hours of the day they can call you, the tactics they can use on the phone (they can’t abuse or threaten you), and they can’t divulge details of your account to anyone else.
However, the law, regulations and industry practices are struggling to come to terms with the age of social media. As call screening technology becomes nearly universal, and as email becomes less and less effective, creditors are looking for new ways to find late payers – and Facebook and other social media sites are obvious ways to contact you – and your relatives.
This can have a significant effect on military families, with deployed servicemembers having limited access to phones. They frequently use social media sites to stay in touch with one another.
In at least one case, a collection agency, CBV Collections, may have created profiles of attractive young women to “friend” debtors in order to keep tabs on them and to collect information in their associates. This practice is becoming more prevalent, according to Michelle Dunn, a 24-year veteran of the credit and collections industry and author of a book, “The Guide to Getting Paid.”
In one case, a Jacksonville collection agency, MarkOne, received an order to cease contacting debtors on Facebook – after it had written requests to call them on customers Facebook “walls.” In at least one case, MarkOne had contacted online friends of the creditor in order to ask them to use their influence to get the creditor to call.
What Creditors Can’t Do
Under federal law, creditors must clearly identify themselves and their purpose when contacting you, whether in writing, in person or telephonically. They cannot contact you under false pretenses, nor can they conceal their identities.
Creditors may not contact anyone other than you, co-signers, your attorney and your spouse.
They cannot contact you at work if you direct them not to. They may try to locate you and call a work number as part of that purpose, but they cannot discuss the debt with anyone else at work. They also cannot threaten to tell anyone at work, nor threaten your employment.
They can’t contact you once you tell them to stop. But if you do that, you might leave them no other option but the courts, so be careful about doing that. If you tell them to stop, contacting you, they cannot contact you again other than to notify you of a lawsuit.
Those restrictions apply throughout the United States under the Fair Debt Collections Act.
The long-anticipated drawdown cycle for the U.S. military has begun in earnest: The Army announced plans to slash the Army’s maneuver forces by ten Brigade Combat Teams. Because if there’s one thing we learned from our experiences in Iraq and Afghanistan, it was that we had too many of those pesky BCTs.
The announcement came on Tuesday from General Ray Odierno, the current Army Chief of Staff. The BCTs designated for elimination are as follows:
- 4th Stryker BCT, 7th Infantry Division, Joint Base Lewis-McChord, Wash.
- 3rd Armored BCT, 4th Infantry Division, Fort Carson, Colo.
- 4th Infantry BCT, 1st Armored Division, Fort Riley, Kan.
- 4th Infantry BCT, 101st Air Assault, Fort Campbell, Ky.
- 3rd Infantry BCT, 1st Infantry Division, Fort Knox, Ky.
- 3rd Infantry BCT, 10th Mountain Division, Fort Drum, N.Y.
- 4th Infantry BCT (Airborne), 82nd Airborne Division, Fort Bragg, N.C.
- 2nd Armored BCT, 3rd Infantry Division, Fort Stewart, Ga.
- 4th Armored BCT, 1st Cavalry Division, Fort Hood, Texas
- 3rd Infantry BCT, 1st Armored Division, Fort Bliss, Texas
These units are in addition to two brigade combat teams the Army has already announced would be decommissioned: the 170th and 172nd BCTs, both stationed in Germany. Odierno also said the Army planned to deactivate at least one more BCT, again overseas. Ultimately, the number of Brigade Combat Teams in the Army is slated to fall from 45 to 32. At the end of the process, the Army force mix will include 12 armored BCTs, 14 infantry BCTs, and seven Stryker BCTs.
Nevertheless, despite the large decrease in the number of BCTs, the number of maneuver battalions in the Army will remain relatively stable: The Army will fall from 98 battalions to 95, according to Odierno. The Army will accomplish this by increasing the number of maneuver battalions in the remaining brigades from two to three. The new table of organization and equipment will also plus up the artillery and engineering capability for each brigade.
Each remaining brigade will increase in authorized end strength by about 1,000 soldiers, from 3,500 to 4,500, said Army sources.
Field Grade Officers Hardest Hit
The planned reorganization will largely maintain the number of command slots available for combat arms captains. However, they will come at the expense of the promotion prospects for more senior officers. The most obvious personnel effect will be the reduction of brigade command opportunities for colonels and promotable lieutenant colonels. Looked at more broadly, the Army is losing a substantial number of field grade officer slots for majors and lieutenant colonels in the maneuver brigades. This means that while accession to captain will remain strong, and while strong combat arms lieutenants and captains still have an excellent shot at being selected for company command, these commanders will have to file into a sharply restricted number of opportunities for majors on brigade staffs. However, once selected, many of these majors will trickle up to positions on division staffs, where they will no doubt be a lot of help.
Odierno’s plan distributed the pain of troop reductions across ten different posts in ten congressional districts while avoiding having to actually close any military installations.