Both Freddie Mac and Fannie Mae will be offering additional
consideration to military personnel who may be facing problems with their
mortgage due to service related orders.
The two GSEs were directed to address
mortgage servicer practices that pose risks to home owning service members and
to ensure compliance with applicable consumer laws and regulations. The “guidance” came from regulators the
Federal Reserve, Consumer Financial Protection Bureau, Federal Deposit
Insurance Corporation and other regulators.
The guidance pertains to risks faced by homeowners
who have received Permanent Change of Station (PCS) orders, that is have been
ordered by the military to relocate to a new duty station or base. Such orders are received by about one-third
of active-duty service members each year.
PCS orders are non-negotiable and carry short, strict
timelines. Homeowners with such orders,
however, are still obligated to honor their financial obligations including
their mortgages. In the current
environment, with so many homes underwater, these service members may be unable
to sell their homes and obtain sufficient funds to pay off the mortgage debt
and may have to continue mortgage payments while making rent or other housing
payments in their new location.
Under the new guidelines, receipt of a PCS will be
treated as a hardship for the purpose of qualifying for a short-sale even if the
homeowner is current on the existing mortgage.
Military with PCS who complete a short sale will be exempt from
deficiency judgments from Fannie Mae and Freddie Mac and relieved of any
request or requirement to contribute cash to the sales proceeds or to sign a
promissory note for any outstanding balance as long as the property was
purchased on or before June 30, 2012.
In addition to holding PCS order, the homeowner must
have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac to be eligible
for the program. The status of the
mortgage can be current or delinquent. Freddie
Mac and Fannie Mae were instructed by regulators last year to treat PCS orders
as a hardship for purposes of modifications and forbearance.
Mullings, Freddie Mac’s Interim Head of Single Family Business and
Information Technology said, “Freddie
Mac is proud to support this important new effort to help servicemen and women
when national duty requires them to sell their homes in an uncertain
market. 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
The Federal Housing Finance Agency
said it would provide final guidance by September 30 and the short-sale reforms
would be effective 60 days later.