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New Policy Extends Short Sale to Military Homeowners

The FHFA directive recognizes PCS orders as hardships, qualifying military homeowners for short sales. Military members are often ordered to a Permanent Change of Station (PCS), forcing them to move into a new home, in another city or state. Such unexpected moves present enormous challenges for the service members and their families, especially those who owe more than their property is worth and cannot sell their home without taking a loss.

Service Members & Short Sale

Even though PCS orders operate under fast and rigorous timeframes, service members are treated the same as an ordinary citizen, obligated to tend to their financial duties including their mortgages. Often, when their property has declined in value, military homeowners are unable to sell it and obtain sufficient funds to pay off their mortgage. Therefore, when PCS orders were given, military homeowners and their families had no choice but to default on their mortgage or to pay mortgage for a new house along with the old one.

Fortunately, that it is no longer the case, as the Federal Housing Finance Agency (FHFA) has announced a directive on June 21st, 2012, considering PCS orders as a hardship. Therefore, military homeowners who receive PCS orders are now eligible to short sell their property.

Importantly, this directive only applies to service members who are Fannie Mae and Freddie Mac borrowers.

Advantage of New FHFA Directive

The new policy enables military members who have Fannie Mae or Freddie Mac loans to sell their primary home for less than what they owe on their mortgage – a short sale.

The directive applies to military homeowners even if they are current on their mortgage. However, the property has to be purchased on or before June 30th, 2012. Consequently, Fannie Mae and Freddie Mac will also not pursue deficiency judgments or a contribution for property purchased on or before June 30th, by military members who have received PCS orders.

Professionals in New Jersey real estate law understand the importance of this change for military homeowners who now have access to the full range of foreclosure alternatives.


A joint guidance has been issued on June 21st, 2012 by five federal agencies (Consumer Financial Protection Bureau, Federal Reserve System, Federal Deposit Insurance Corp., National Credit Union Administration, and the Office of the Comptroller of the Currency) to protect military homeowners who have received Permanent Change of Station from the perilous practices of their lenders.

The guidance ensures the compliance of the mortgage suppliers’ practices with applicable consumer laws and regulations. For instance:

• Failing to provide service members with accurate, clear, and readily understandable information about available assistance options for which the homeowner may qualify based on the information known to the mortgage servicers; or

• Failing to provide a reasonable means for service members to find out information about the status of their request for assistance.

Thus, if a mortgage servicer is found to be engaging in improper practices, the federal government will take the appropriate measures to enforce the guidance.

Hence, service members who find it difficult to pay their mortgage should verify if Fannie Mae or Freddie Mac holds their loan and take advantage of the unique opportunity by reaching out to a Burlington County real estate attorney who will explain how these changes can relieve them from their financial difficulties.