New options arise for many military homeowners
7/7/2012 - SCHRIEVER AIR FORCE BASE, Colo. (AFNS) -- The Federal Housing Finance Agency recently announced changes to its short-sale policies that should make it easier for military homeowners with Fannie Mae- or Freddie Mac-backed mortgage loans to honor their financial commitments when they are required to move as part of their duty.
Under the new policy, Fannie Mae and Freddie Mac will not pursue deficiency judgments, cash contributions or promissory notes from members of the military with a change in duty station for any property purchased on or before June 30. Service members must have a Fannie Mae or Freddie Mac loan to be eligible.
According to FHFA records, Fannie Mae and Freddie Mac together own or back more than half of the country's $12 trillion in mortgages.
Christina Stump, an accredited financial counselor at Schriever Air Force Base's Airman and Family Readiness Center, said the FHFA announcement is good news because it creates additional options for homeowners who receive permanent change of station orders. However, she cautioned homeowners to investigate all options when it comes to selling or renting their property.
"This is one of the biggest concerns for military families right now," Stump said. "The housing industry still hasn't recovered from the (2008) credit crisis and the resulting decline in real estate values. Chances are if someone purchased a home in the past seven years, their home's value is less than the price they paid. So when they PCS, it's difficult to discover and decide on the best course of action."
The FHFA said its policy change resulted from analysis that showed PCS orders often require quick moves, which can create hardship for military homeowners who currently owe more on their mortgages than their home is worth and, therefore, cannot sell their home without taking a loss.
Edward J. DeMarco, FHFA's acting director, explained that previously, many service members felt their only option was either to maintain financial obligations on two residences or default on their mortgage.
"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. "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."
Since Fannie Mae and Freddie Mac are mortgage guarantor companies, not mortgage lenders, many military members may be unaware of their mortgage loan's connection to the agencies. Service members can check Fannie Mae or Freddie Mac websites to see if their loans are held by these government-sponsored enterprises or they can call hotlines for military homeowners at 1-877-MIL-4566 or 1-800-FREDDIE.
The recent news comes on the heels of additional FHFA policy changes regarding service members and the nature of military service. Last year, Fannie Mae and Freddie Mac issued guidance to mortgage servicers confirming PCS orders as a qualifying hardship for forbearance and loan modifications.
Stump recommended that homeowners consider alternative housing assistance options before deciding on the option to short sell their home.
"A short sell is where an owner sells their home for less than the amount they paid," Stump said. "It's going to help people avoid foreclosure, but it's not the best option because people will lose the difference between their purchase and sell price."
Homeowners, for example, can choose to keep their current home and apply to refinance their loans.
"Refinancing and obtaining a better interest rate can help people lower their monthly payments in the long term," Stump said. "By renting their home, they can then offset their lower mortgage payment through rental contributions."
Forbearances and repayment plans are modifications made through mortgage lenders that allow homeowners who have missed payments to extend the length of their loan.
"The most important thing service member families need to understand is that they have a multitude of options available to them," Stump said.