Help for struggling military homeowners
Military families throughout the country are not immune to the ongoing housing crisis. On my travels to military bases, I’ve heard too many distressing stories about servicemembers who are underwater on their mortgage and are faced with military permanent change of station (PCS) orders that require them to relocate at a time when their home is worth less than what they owe.
This problem has forced some military families into the costly and stressful situation of maintaining two households, with the family remaining behind while the servicemember moves alone. Other servicemembers have had to let their homes be foreclosed on.
This situation cannot be addressed by the Servicemember’s Civil Relief Act (SCRA), which applies only to pre-service mortgages. The military homeowners affected by PCS orders are on active duty and are likely to have assumed their mortgage after they entered the service.
These servicemembers may have been faithfully paying every month but will no longer be able to keep up once they move. They may have a smaller Housing Allowance at their next duty station and a loss of income as their spouse tries to find new employment. They can’t sell their home for enough to pay off the mortgage and they often can’t rent it for enough to cover the mortgage payments.
So, PCS orders can put servicemembers in a financial bind that is hard to escape. They’ve told me that when they ask for a short sale or loan modification, their financial institution has answered that they need to be delinquent in order to be considered as having a qualifying financial hardship. Deliberately defaulting on a loan is something no servicemember should be asked to do.
This problem has drawn the attention of policymakers, including Representatives Elijah Cummings, Adam Smith, and Robert Andrews, who along with other Members of Congress sent a letter to several government agencies earlier this week encouraging them to address the issue.
The Department of Treasury has just announced updated guidance to its Home Affordable Foreclosure Alternatives (HAFA) Program that may help in some circumstances. HAFA pays incentives for a short sale or a deed-in-lieu of foreclosure used to avoid foreclosure when a borrower is financially unable to continue to pay their mortgage. Under the new guidance, servicemembers who cite a PCS order as the basis for their financial hardship when asking for help under HAFA will now be eligible even if their income has not decreased.
I applaud this step taken by Treasury to recognize that military orders to move can trigger a genuine hardship for military homeowners. And I encourage other policymakers and the financial industry to think about what they can do to work together to create commonsense solutions to help servicemembers caught in this situation.