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If you’re in a bind on mortgage payments on a house at a former duty station — or are facing that prospect with an upcoming permanent change-of-station move — you should look into relocation assistance payments.
Lenders offer these cash payments once a borrower wants to pursue a short sale, said former Air Force officer George Chung, senior vice president of Wells Fargo Home Lending.
The incentive offered by Wells Fargo is generally about $3,000, Chung said. That’s over and above the bank’s agreement to allow the house to be sold for less than the outstanding mortgage balance. This allows the borrower to walk away from the loan.
Under guidelines issued by the Federal Housing Finance Agency in November, homeowners with a mortgage owned by Fannie Mae or Freddie Mac can sell their home in a short sale even if they are current on their mortgage, if they have an eligible hardship.
Military personnel with PCS orders are automatically eligible for short sales and are not required to contribute funds to cover the shortfall between the outstanding loan balance and the sale price on their homes.
Under the Home Affordable Foreclosure Alternatives program, homeowners are fully released from their mortgage debt after selling their home. And the HAFA program may provide $3,000 in relocation assistance to make the transition easier.
Those eligible for short sales under HAFA must have obtained their mortgage before Jan. 1, 2009. To expedite a short sale, Fannie Mae and Freddie Mac also will offer up to $6,000 to financial institutions that hold a second mortgage on the property.
Individual financial institutions sometimes have offered more incentives to strapped homeowners, even to those who may not qualify under HAFA. Each case is different.
One Navy officer said he received $20,000 under a homeowner’s incentive program offered by Bank of America, even though his house was worth about $125,000 less than what he owed on his mortgage when he sold it late last year.
The officer, who asked to remain anonymous, filed the paperwork in mid-October, and approval came Oct. 31. His house was on the market for three days, and he said the process was simple with Bank of America and the bank that held his second mortgage.
But details of these programs are not always easy to find. If you believe a short sale is your only option besides foreclosure, do an Internet search for the name of your financial institution and “short sale incentives” or “short sale.”
Chung advises Wells Fargo customers to click on the link for active-duty military and contact a representative who can help customers explore their options.
This is good advice regardless of which financial institution holds your mortgage.
Before going the short-sale route, check with a tax expert on the tax implications, and check with your command’s expert on security clearances before beginning the process.
Karen Jowers is the wife of a military retiree.