My House Is Worth Less Than I Owe and I Have to Move for Work
The job is in another city, the house is worth less than the loan, and you can't carry two housing payments for long. Lenders see this one often enough that it's written into their rules.
A Job Move Counts as a Hardship
Fannie Mae's servicing guide, section D2-1-01, lists the hardships a servicer can accept. One of them is a "distant employment transfer/relocation, including a PCS order, greater than 50 miles one way from the property securing the mortgage loan."
You don't have to be behind to be considered. The same section lets a servicer evaluate a borrower who is current or less than 60 days late, as long as the house is your principal residence and your non-retirement savings are under $25,000. Servicemembers with PCS orders more than 50 miles away are exempt from that savings limit.
FHA loans have their own version. HUD's 2013 guidance, Mortgagee Letter 2013-23, allowed owner-occupants who were current or less than 30 days behind to be considered for a pre-foreclosure sale when a job transfer was more than 50 miles one way. For servicemembers with PCS orders at least 50 miles away, it described a streamlined path that didn't require the usual hardship paperwork. That same letter also said the mortgage has to be in default on the day an FHA pre-foreclosure sale closes. FHA's rules have been updated since 2013, so your servicer is the one to confirm what applies today.
Your Options
Sell and cover the gap yourself. If you have the cash, it's an ordinary sale and the loan gets paid off.
Sell short. The lender agrees to take less than it's owed. It approves the sale, the costs, and what it asks of you.
Does a Short Sale Cost the Seller Anything?
Keep it and rent it out. Some people do this until values come back. Your mortgage has occupancy terms, so you might wanna read that section before counting on it. Being a landlord from another city has its own costs. And if you're a servicemember, the SCRA lease protection in 50 U.S.C. 3955 protects servicemembers who are tenants. It doesn't help you as the landlord. If your tenant is a servicemember who gets orders, they may be able to end your lease early.
Hand it back with a deed in lieu. Fannie Mae calls it a Mortgage Release and pays a $7,500 relocation incentive after a successful one on a principal residence, with some exceptions. Lenders usually look at it after a short sale doesn't work.
Ask your employer. Some relocation packages cover a loss on sale. Some don't. HR is the place to ask.
VA Loans
VA rules allow a short sale on a VA-guaranteed loan. Under 38 CFR 36.4322(e), the holder can approve one without VA's prior sign-off if it's determined the loan can't be saved, and the owner can't receive any money from the sale.
If You're on Active Duty
The Servicemembers Civil Relief Act, 50 U.S.C. 3953, covers a mortgage you took out before you entered service. A foreclosure sale on that mortgage during your service, or within one year after it ends, isn't valid without a court order or a valid waiver.
The Balance Left Over
Florida lets a lender pursue the deficiency. For an owner-occupied home, Florida Statute 702.06 caps it at the outstanding debt minus the fair market value on the date of sale in a short sale. Whether it's waived depends on your loan and your approval letter. That's a question for a Florida attorney.
Forgiven debt can also be taxable. That's a CPA question.
Where I Fit
I'm SFR certified, Short Sales and Foreclosure Resource, and MRP certified, Military Relocation Professional. A relocation with an underwater house sits right where those two meet.
I'm based in Jacksonville and licensed in Florida. If the house you're leaving is out of state, I can't represent you there, but I can put you with someone in the SFR® network who can. If you're moving to Northeast Florida, that part I can help with too.
If You Want to Talk
If you've got questions, reach out and we'll go through where you stand. You don't need orders in hand or a decision made.
Jim Armstrong, REALTOR® · Momentum Realty · SFR® and MRP Certified JimArmstrong904@gmail.com
Jim Armstrong is a licensed real estate agent (REALTOR®) with Momentum Realty. This page is general information, not legal, tax, or financial advice, and it is not VA or FHA eligibility advice. Lender rules change and every file is different. Consult a Florida attorney, a CPA, your servicer, or a HUD-approved housing counselor about your situation.
Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.
Even if you accept this offer and use our service, your lender may not agree to change your loan.