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Consumer Watch: Feds issue PCS guidelines for lenders, other protections

Jul. 5, 2012 - 02:15PM   |   Last Updated: Jul. 5, 2012 - 02:15PM  |  
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Federal officials recently announced more help for struggling military homeowners who need to sell their homes because of permanent change-of-station moves but are having trouble because their house has declined in value. Here's what these changes could mean for you:

More short-sale assistance

Military homeowners whose mortgages are owned by Fannie Mae or Freddie Mac soon will be eligible to sell their homes in a short sale even if they are current on their mortgage. A short sale happens when you sell your home for less than the balance remaining on your mortgage. Now, Fannie Mae and Freddie Mac will not pursue a deficiency judgment or any cash contribution or promissory note for the difference between what is owed on the mortgage and the sale price.

But note: This does not take effect until later this year, so it won't help those who are selling their houses now, during the busy summer PCS season. The Federal Housing Financing Agency will issue guidance by Sept. 30, and it will be effective 60 days later.

Eligibility requirements:

• The homeowner must be in the military and have PCS orders.

• The mortgage must be owned or guaranteed by either Fannie Mae or Freddie Mac. To find out if this applies to your home, visit http://www.fanniemae.com/loanlookup">www.fanniemae.com/loanlookup or call 800-732-6643; or www.freddiemac.com or 800-373-3343.

• The house must have been bought on or before June 30, 2012.

Protections reinforced

Concerned that some mortgage servicers are engaged in practices that harm military homeowners, the Consumer Financial Protection Bureau and the regulators — the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Office of the Comptroller of the Currency — have issued guidance to the loan servicers about working with service members.

When military homeowners notify their servicers about PCS orders, servicers must:

Provide accurate, clear and readily understandable information about assistance for which the homeowner may qualify. Those options include the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration, the Veterans Affairs Department and the Department of Agriculture Rural Development.

Never advise homeowners to intentionally skip payments. The CFPB's Office of Servicemember Affairs has heard of some servicers advising troops with PCS orders — who are current on their mortgages — to do this to make it look like they are having financial difficulties in order to get assistance from programs for which they would not otherwise qualify.

Provide a reasonable means for homeowners with PCS orders to find out the status of their request for assistance. Too often, according to the Consumer Financial Protection Bureau, homeowners have trouble reaching someone who can help, and after requesting assistance, they have to go to a different loan officer with each phone call and start from square one each time.

Never ask homeowners with PCS orders to waive their rights under the Servicemembers Civil Relief Act or any other law as a prerequisite to receiving information about the homeowner's options or evaluating that homeowner's eligibility for assistance.

Communicate their decisions regarding requests for assistance in a timely manner and include an explanation of the reason for a denial so the homeowner can address any deficiencies.

Richard Cordray, director of the Consumer Financial Protection Bureau, said some mortgage servicers have failed to answer calls and made it difficult for customers to reach them; many have lost paperwork repeatedly.

"And because of widespread delays in processing, some homeowners who qualified for loan modification have not gotten [it] in time to stop foreclosure," Cordray said. "That's highly damaging to service members, who do not have the luxury of time when responding to PCS orders."

If you think your mortgage servicer has treated you unfairly, submit a complaint at http://www.consumerfinance.gov/complaint">www.consumerfinance.gov/complaint or call the Consumer Financial Protection Bureau at 800-855-411-2372. The bureau will make sure the complaint gets to the regulator who has jurisdiction over a particular mortgage servicer.

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