WASHINGTON – The regulator for Fannie Mae and Freddie Mac yesterday said it will give the two mortgage giants the ability to allow military members who are ordered to switch bases – known as Permanent Change of Station orders – and who are still current on their mortgages to sell their homes through a short sale.
The Federal Housing Finance Agency said it made the decision because military orders to transfer base have forced many military members into difficult financial straits. Many are forced to keep two homes or default on their loans.
Under the new policy, a military order to transfer bases would be considered a hardship that qualifies for a short sale approval. As a result, borrowers will be allowed to sell their homes for less than the outstanding mortgage amount without having missed mortgage payments.
The new rules impact homes purchased before June 30.
“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 Edward DeMarco, director of the FHFA.
Service members who receive Permanent Change of Station orders often must move quickly, and their household income may drop if the servicemember cannot find a renter willing to pay a price that will cover the mortgage payment. Service members also can face reduced income if the spouse cannot immediately find a job in the new location.
The federal agencies said military homeowners face unique challenges and need timely information about their loan modification and short sale options in order to avoid defaulting on their loan obligations.
The new rule comes as NCUA and banking regulators issued recommended policies for servicers of military mortgages urging more disclosure and explanations of options available to service members.