The US Department of Housing and Urban Development issued Mortgagee Letter 2009-49 to provide guidance for addressing FHA requirements for secured subordinate financing under the Federal Housing Administration’s reverse mortgage program. 

According to the ML, Home Equity Conversion Mortgage (HECM) regulations require that there shall be no outstanding or unpaid obligations, either unsecured or secured, incurred by the HECM mortgagor in connection with the HECM transaction, except in cases involving repairs to the property required under 24 CFR 206.47, or mortgage servicing charges permitted under 24 CFR 206.207(b), or both.

The following are allowable subordinate liens at HECM origination:

1. State and Local Court Judgments and Judgment Liens
2. Federal Judgments and Debts

ML 09-49 also states that it’s the mortgagee’s responsibility to ensure that the first and second HECM liens are the first and second liens of record, and that other liens, where permitted, do not intervene between the first and second HECM liens.

The mortgagor may seek a home equity loan, or another type of real estate financing transaction, after a HECM is endorsed for insurance by the FHA. Liens required by the additional financing must be subordinated to the HECM first and second liens.

To read more about ML 09-49, check out the link below.

Mortgagee Letter 2009-49