Short Sale Protection for PCS

Family moving
U.S. Navy photo
Many military families are no strangers to PCSing – receiving Permanent Change of Station orders is par for the course in military life. And more often than not, spouses (and children) have to stay behind to try to sell the family home. Fortunately, Freddie Mac and Fannie Mae have relaxed their short sale requirements to offer more protection for service members and their families. Under the terms of the new guidelines, military homeowners who have orders to move do not have to be delinquent on their mortgage in order to qualify for a short sale. For example, say a homeowner wants to sell their home, but the value of the home is appraised at less than what they still owe. In a standard transaction where the home sells for less than what is owed, the homeowner would use the money from the sale, plus extra, to pay off the sum of the mortgage. However, in a short sale, the home is sold for its market value and the remaining mortgage debt is settled. Because short sales require the lender to take a loss, many lenders will only consider a short sale if the homeowner is delinquent on the mortgage payments or are in danger of “imminent default” due to death, disability or divorce.    

In order to meet the delinquency or hardship requirements, most military homeowners would skip mortgage payments (while ruining their credit and jeopardizing security clearances) – even if they could afford it – in order to sell their underwater homes. And the worst part is, once the homeowner has defaulted on their payments, the lender is not required to agree to a short sale and may choose instead to foreclose on the home. But under the new terms set by the Federal Housing Finance Agency, military members with PCS orders who are current on their loans do not have to show they are having financial difficulties to receive short sale consideration. This will make it considerably easier on families who are required to move as part of their obligation to the armed forces.  It’s important to note that the home must have been purchased on or before June 30, 2012, this applies only to homeowners with a GSE-backed mortgage, and the sale price is subject to approval. 
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