Real Estate Help for Active Duty Military Servicemembers

By Ted Ricasa

VIDEO: The Servicemembers Civil Relief Act: Housing Protections

The men and women who honor and protect our nation through their military service face most of the same real estate issues as civilian homeowners, along with many unique challenges. Perhaps the greatest challenge confronting active duty military homeowners is what to do with their homes when they receive Permanent Change of Station (PCS) orders. Such orders are inevitably stressful for servicemembers and their families under the best of circumstances; factor in the additional stresses of home ownership, and the situation can become overwhelming.

First of all, if you or your spouse is an active duty member or a veteran of the U.S. Armed Forces, we'd like to thank you for your service to our country. You have sacrificed greatly to protect our interests, and we want you to have the information necessary to protecting your interests as a homeowner. By knowing your rights and options when it comes to issues concerning your home, you can make the decisions that are best for you, your family, and your community.

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What is the Servicemembers Civil Relief Act?

The Servicemembers Civil Relief Act is a federal law that was enacted in 1940 to postpone or suspend select civil obligations of active duty military personnel. The law was originally passed as the United States was on the verge of entering World War II, but has been amended more than a dozen times since then to reflect the changing needs of servicemembers.

As a homeowner, it is vital that you understand your rights under this law. The law requires that, in most cases involving civil claims against military personnel, financial institutions, landlords, and other potential litigants first seek and obtain a court order. Generally, such orders will not be granted unless the litigant can show that the servicemember is no longer on active duty. Even then, certain protections are extended to veterans.

Specifically, the law protects servicemembers against:

It is essential that you, as a member of the United States Armed Forces, understand your rights under this extremely important act, and that you do not waive those rights if asked to do so by a financial institution, even as a prerequisite for assistance.

More: USAA member offers free membership and a newsletter packed with valuable information for military homeowners

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:

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.

Useful resources: PCS Travel Pay Calculator and BAH Calculator

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:

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.

More: Establishing an Appropriate Price Range for Your Home

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:

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.

More: Short Sales: Your Options As a Homeowner

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:

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:

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:

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How has the housing crisis specifically affected active duty military personnel?

According to Holly Petraeus, who leads the Office of Servicemember Affairs for the Consumer Financial Protection Bureau, "More than a third of the consumer complaints we've received from the military are mortgage-related. And at listening sessions around the country, concerned military families have told me about the painful consequences of poor mortgage servicing, sloppy lender recordkeeping, and inconsistent foreclosure practices."

Complaints that active duty military personnel were losing their homes to foreclosure while deployed in war zones drew the ire of the American public and resulted in the commencement of Congressional hearings in 2011. Several lenders settled claims that they had improperly foreclosed on military properties in light of these hearings.

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.

More: Foreclosures: Understand Your Rights, Know Your Options

Why should I contact Fast Home Help?

Whether you interested in selling your current home or buying a new home, or you simply want to understand the options available to you as an active duty military homeowner, we urge you to contact the real estate professionals of Fast Home Help today. We can offer you the guidance you need to make the best possible decisions for you and your family, leaving you free to focus on your duties as you proudly serve your country.

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