Under a new guideline, military members with Fannie Mae or Freddie Mac loans will now have an easier time with short sales.
Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco announced in a release Thursday that military homeowners who receive Permanent Change of Station (PCS) orders can sell their homes via short sale without having to go into default first.
“It is in everyone’s interest for the men and women serving in our armed forces to focus on the important job they are doing defending our country, rather than worry about the maintenance and leasing of a property in another jurisdiction,” said DeMarco in a release. “These Fannie Mae and Freddie Mac policy changes, in combination with related guidance last fall, should now provide military homeowners with access to the immediate and automatic full range of foreclosure alternatives.”
Last year, Fannie Mae and Freddie Mac issued guidance to servicers to have PCS orders count as a hardship for military members seeking relief.
The new policy takes an even greater step forward and will allow military members with PCS orders to sell a primary residence purchased on or before June 30, 2012 for less than the balance on their mortgages even when current on their payments. Short sales transactions typically require homeowners to be delinquent on their mortgage.
The GSEs also won’t pursue a deficiency judgment or a contribution under the new policy. Typically, borrowers contribute to closing costs and can also be pursued for the remaining balance after a short sale is completed.
Since PCS orders require military members to relocate, they can create a hardship, especially at a time when millions are underwater and can’t sell their home due to negative equity. This led many service members to be stuck with two residences or to default on their mortgage.
In response to the new guideline, Freddie Mac’s Interim Head of Single Family Business and Information Technology Paul Mullings said, “We look forward to working with our servicers on this new short sale policy. Together we can help ease the challenge of relocation for military families when Permanent Change of Station orders are received.”