New financial guidance may help troops as they move

WASHINGTON – Homeowners with military transfer orders will be immediately eligible for short sales under new guidance to mortgage servicers that may help tens of thousands of military homeowners moving to a new duty station, Consumer Finance Protection Bureau officials said today.

Military homeowners will be eligible for short sales, even if they are current in their mortgages, Edward J. DiMarco, director of the Federal Housing Finance Agency, said at a news briefing. They also will be exempt from deficiency judgments from Fannie Mae and Freddie Mac when receiving permission for a short sale and relieved of any request for cash, contribution or promissory note so long as the property was purchased on or before June 30, 2012, according to the guidance.

“These changes will make it easier for members of the armed forces with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to honor their financial commitments when they are issued a permanent change of station order,” DiMarco said. The agency classifies the order as a hardship, he noted.

The bureau, along with mortgage service industry regulators, is issuing joint supervisory guidance to address mortgage service practices that pose risks to military homeowners, Richard Cordray, the bureau’s director, said.

“We want to make sure that mortgage servicers comply with the laws that prohibit unfair or abusive practices” when service members have orders to move, he said.

Roughly a third of active-duty military personnel move each year. Of these, about 185,000 are homeowners who have to sell their houses and move to another community. Many find themselves owing far more on their homes than they’re worth in the current market.

Service members cannot sit on a property and wait for the market to recover: they must go to their new base, Cordray noted. “They have to move, even if that means taking a big financial hit or leaving their families behind to pay their bills,” he said.

“I have heard over and over from military homeowners whose houses are underwater and they don’t know what to do,” said Holly Petraeus, director of the bureau’s Officer of Service Member Affairs. “They are terrified that a foreclosure will ruin their finances as well as putting their security clearances at risk, and they are looking for answers.”

But in too many cases, she said, mortgage service providers have not given that help. In her travels to military bases, Petraeus said, service members have told her of mortgage service providers giving them inaccurate information and stringing them along.

“We’ve heard from service members that they were told they had to be delinquent to qualify for help, and advised to skip a couple of payments,” she said. “They’ve been asked to sign waivers of their rights under the Service Members Civil Relief Act just to have their cases evaluated. They’ve been stalled by repeated demands for their loan documents and given a new loan official with each call, … and they have even been listed as not responding to requests for documents during deployment despite the fact that spouses had powers of attorney.”

Robert L. Gordon III, assistant secretary of defense for military community and family policy, said the Defense Department welcomes the bureau’s leadership.

“The military lifestyle poses unique challenges to our troops and their families,” he said. “Throughout frequent moves, deployments and transitions they must remain resilient and strong in order to be mission ready.”

Homeowners with questions or complaints may contact the Consumer Financial Protection Bureau at consumerfinance.gov and 855-411-2372.