We’d like to start off by saying that if you are a service member or veteran reading this page, we would like to thank you for your sacrifice and commitment to our country. We want nothing more than to help guide you with the proper information to make the best decision needed for your situation and your family.
One of the greatest challenges a military homeowner can face is what to do when they receive Permanent Change of Station (PCS) Orders. All homeowners will face challenges when trying to sell their home, but service members have unique circumstances that make things just a little more difficult. It can be overwhelming, to say the least.
The biggest concerns we hear from our service members is that they need to be able to sell their house quickly. PCS orders can come suddenly without very much time to prepare for the move. Some service members have to prepare for relocation to a whole new country. So when you are a military homeowner you can imagine the stress of trying to sell your home fast with a time crunch like that. Especially if the home needs repairs to be able to sell on the market.
Can we help?: Can we assist you in buying or selling a home?
Have you ever heard of the Service Member Relief Act (SCRA)?
In a nutshell, the Service Member Relief Act or SCRA, restricts or limits actions that can be taken against military personnel or even their families & close loved ones when they receive military orders. Especially to those who are overseas.
The Act was created as a means to make sure service members “Devote their entire energy to the defense needs of the Nation”.
SCRA includes protections and provisions which cover termination of:
- Rental agreements
- Automobile leases
- Phone service
- Suspension of professional liability insurance
- Right to continue to vote at state, federal and local levels
- Eviction prevention
- Security deposits
- Installment contracts
- Protection against default judgments
- Postponement of foreclosures
- Postponed civil judicial proceedings
- Deferred income tax payments
- Protection for a small business owner
If you are unsure if the Service Member Relief Act applies to you, you can find out your eligibility through your base legal assistance office.
I have received my PCS orders. Is it better to rent or sell my home?
Many military families who either have difficulty selling their homes or simply don’t want to sell their homes end up renting them out, often to fellow servicemembers. If you have received PCS orders and are considering renting your home, it is important to keep the following in mind:
- You will assume the obligations of a landlord under landlord-tenant law. These obligations include keeping the property clean, safe, and habitable.
- If you rent to another military family, they will be protected under the same laws that protect you and your family. Specifically, they will be protected under the Servicemembers Civil Relief Act, which protects them from eviction due to nonpayment without a court order. The courts will not approve an eviction if the servicemember is unable to afford rent due to the effects of military service. Likewise, servicemembers may break a lease at any time if they receive PCS orders or orders to deploy with a military unit for at least 90 days, potentially leaving you without rental income for a period of months.
If you decide to rent your home to a fellow servicemember, it is a good idea to establish an emergency fund to cover your mortgage payments and other expenses in the event that your tenant receives PCS orders.
I want to sell my home, but I haven’t had any success so far. What can I do?
If you have had your PCS orders and have been trying to sell your home without success, you are probably feeling frustrated and upset. It may seem as though there are no great options available to you, and unfortunately that may well be the case. In such circumstances, you may have to accept that there isn’t a single definitive solution to your problem and settle for the option that best serves the interests of you and your family.
Among other available options, you can:
- Lower your asking price for the home: If your home appears not to be drawing much interest for the price you are asking for it, you may want to simply drop the price and try to limit your financial bleeding as much as possible. Weigh the costs of dropping your asking price against the cost of keeping the home without tenants for several months, including mortgage payments, taxes, insurance payments, and maintenance costs. In the end, you may actually save money by dropping the price.
- Consider a short sale, which could be your best option if your home is worth less than you owe on it. Fast Home Help may be able to assist you in your short sale.
- Leave your family behind until the home sells: This may seem like an unattractive option; however, it would eliminate some of the costs of maintaining and insuring your home while it is unoccupied.
Whatever you do, try to avoid defaulting on your mortgage payments or feeling pressured into bankruptcy. There are always alternatives to these actions, especially for military personnel, who enjoy certain protections against civil actions under the Servicemembers Civil Relief Act. You should be particularly wary of any financial professional who implies that you should deliberately default on your mortgage payment in order to create the impression of substantial financial hardship. Defaulting on your mortgage payments or declaring bankruptcy can jeopardize your security clearance as a member of the United States military.
Does my home qualify for a short sale?
Before 2012, military families who wanted to sell a home for less than was owed on it had to meet the same delinquency and hardship requirements as civilian homeowners. That is, they had to demonstrate to their lenders that the home was indeed underwater (worth less than was owed) and that they were faced with a long-term financial hardship.
Fortunately for military homeowners with GSE-backed mortgages (e.g., mortgages backed by Fannie Mae or Freddie Mac), they now automatically qualify for short sales when they receive PCS orders. Therefore, even if you are current with your mortgage payments and not suffering any substantial financial problems, you will receive short sale consideration from your lender as long as:
- You have valid PCS orders
- Your home was purchased on or before June 30, 2012
- You have a GSE-backed mortgage
In most states, it is possible for lenders to sue homeowners for the difference between the amount for which the home was sold and the amount still owed. However, even if your state allows lenders to collect deficiencies, they are prohibited from doing so in short sales that meet the above-listed criteria.
While a short sale might not necessarily be your best option as a military homeowner, it is an option that you should understand and be prepared to pursue if essential to your best interests.
I want to keep my home, but cannot afford my mortgage payments. What are my options?
If you decide that you want to keep your home, but are unable to keep up with mortgage payments, there are several potential options open to you. These include:
- Military forbearance: If you feel that your financial problems will be short-lived – for example, you need just a couple of months to find tenants for your property – you may want to request a military forbearance from your lender. This forbearance would temporarily suspend or reduce your mortgage payments for an agreed-upon period, after which you would continue to make your payments as usual. One of the benefits of a military (as opposed to a civilian) forbearance is that will not necessarily affect your credit score, depending on the terms of the agreement.
- Negotiate a repayment plan: Again, if your financial hardship is temporary, you may wish to negotiate a plan that would distribute the money you owe over a period of months, tacked onto your usual monthly mortgage payments.
- Refinancing your mortgage: You may be eligible to receive a new mortgage with more favorable terms and interest rates, as well as lower monthly payments, especially if you are current on your mortgage payments and have equity built up in your home. This may be an excellent option if you have a clean financial bill of health and are anticipating a forced change of location.
- Military mortgage modifications: Most major lenders, in light of their violation of the Servicemembers Civil Relief Act during the housing crisis, now offer special military mortgage modification programs. Contact your lender to discuss whether you might qualify from a reduced mortgage interest rate without refinancing, foreclosure protection, special loan modification, or other services designed to protect your interests as a military homeowner.
Do I have any special mortgage protections as a military homeowner?
In a word, yes.
In 2012, the Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners with Permanent Change of Station Orders was issued jointly by the Consumer Financial Protection Bureau (CFPB) and other regulatory boards. According to CFPB Director Richard Cordray, “This guidance provides specific notice to mortgage servicers that this country already has substantial laws in place to help military members in this still-recovering housing market.”
The interagency guidance specifically deals with issues that arise between lenders and active duty military personnel who have received PCS orders. It has the full support of the Federal Housing Finance Agency, and the Departments of Agriculture, Defense, Justice, Treasury, Veterans Affairs, and Housing and Urban Development. The purpose of the guidelines is to help lenders avoid violations of federal consumer financial laws and subsequent enforcement actions by the U.S. government.
Among other guidelines, the interagency guidance recommends that lenders:
- Upon learning of servicemembers’ PCS orders, provide those servicemembers with precise, comprehensible information about the mortgage assistance options available to them.
- Do not, under any circumstances, ask servicemembers with PCS orders to waive the legal rights afforded to them under the Servicemembers Civil Relief Act.
- Provide a reasonable method by which servicemembers can access information about the status of their request for mortgage help.
- Do not advise servicemembers to skip mortgage payments solely to create the impression that they are having financial difficulties in order to qualify for mortgage assistance.
- Reply in a timely manner to all requests for assistance by servicemembers, including detailed explanations for denials if necessary.
If your lender has failed to follow these or any of the other guidelines set forth in the interagency guidance, you are urged to call the CFPB toll free: 1-855-411-2372.
Are there any other mortgage protections I should be aware of?
Many active duty members of our nation’s military want to enjoy the many benefits of homeownership and believe strongly that it is their right as Americans to do so, despite the fact that they are routinely forced to move. Unfortunately, military personnel have been subject to the same issues that affected civilians with mortgages during the housing crisis: poor recordkeeping and other incompetent, sometimes even shady practices by lenders.
As a result, in March 2014, the Consumer Financial Protection Bureau wrote new rules designed to help servicemembers with mortgage problems or problems created by Permanent Change of Station (PCS) orders. These rules include:
However, the matter of banks foreclosing on the homes of military families came to a very public head in March 2013, when ten of the nation’s largest lenders – including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo – reported that they had wrongfully foreclosed on more than 700 military properties during the housing crisis. These wrongful foreclosures were uncovered during mortgage analyses conducted as part of an $8.5 billion settlement deal between the lenders and federal regulators.
The foreclosures directly violated the Servicemembers Civil Relief Act, which required that they obtain court orders before initiating foreclosure proceedings against the homes of active-duty military personnel.
Why should I contact LakeSideBuyers?
So many questions can arise for you as a military homeowner, and there are so many options to explore you may not know about. It is unfortunate that when receiving PCS orders you may not have a lot of time to sell your house before your move. That is why at LakeSideBuyers we will offer you the guidance you need to make the best decision for you and your family in a quick and timely manner. So you can continue serving our country proudly without the added stress on your plate.
You’ve got our backs, let us have yours.