FHA Relaxes H4P Certificate of Occupancy Requirement

The Federal Housing Administration on Friday announced that it will allow mortgagees to take applications for Home Equity Conversion Mortgage for Purchase loans from potential borrowers without a certificate of occupancy and before the completion of reverse mortgage counseling.

Though the FHA will not insure loans until local officials deem the property to be habitable and issue a certificate of occupancy or other equivalent, lenders now simply need to receive the documentation “at any time prior to endorsement.”

“The mortgagee may take the initial loan application either prior to or after the completion of HECM counseling,” the FHA wrote in its INFO #17-44 release.


The rule shift removes a prominent thorn from the side of HECM lenders and brokers, which had long lobbied the FHA and the Department of Housing and Urban Development to allow potential borrowers to submit applications before receiving the certificate of occupancy. As recently as June, the National Reverse Mortgage Lenders Association included a request for that H4P reform in a letter to HUD, among several other key rule changes.

The FHA included the changes in the FAQ section for H4Ps on its Resource Center Knowledge Base. The change was prompted by the recent roll-out of the HECM final rule on September 19, the administration said.

Written by Alex Spanko

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  • This news could not come at a better time. With the new ruling going into effect October 2nd and the concerns expressed in our industry, this opens up the optimistic window.

    The H4P program has had its hardships, this has been one stumbling block. Now with this issue behind us, it will be easier to sell the H4P product.

    There is a market out there for it, the real estate industry needs us, let’s go out there and show them how to increase their income!

    John A. Smaldone

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