source:
  type: guide
  id: hud-4000-1-ii-b-general-hecm-insurance-eligibility
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. General
    HECM Insurance Eligibility (05/25/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. General
    HECM Insurance Eligibility (05/25/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-b-general-hecm-insurance-eligibility-full
  canonical_id: hud-4000-1-ii-b-general-hecm-insurance-eligibility-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. General
    HECM Insurance Eligibility (05/25/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — b. General
      HECM Insurance Eligibility (05/25/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'b. General HECM Insurance Eligibility (05/25/2025) i. HECM Purpose
      FHA insures mortgages secured by HECM Properties under section 255 of the National
      Housing Act. The intent of the HECM program is to provide elderly homeowners
      the option of using the equity in their homes to address economic hardship caused
      by the increasing costs of health, housing, and subsistence needs at a time
      of reduced income. (A) HECM Traditional HECM Traditional refers to a transaction
      where a Borrower with legal title, leasehold interest, or possessory interest
      obtains a HECM to access equity in their current Principal Residence. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 2. Origination/Processing Handbook 4000.1 566 Last Revised: 11/26/2025
      (B) HECM for Purchase HECM for Purchase refers to a transaction where the Borrower
      uses the HECM to finance the purchase of an existing one- to four-unit residence
      where the Borrower will occupy one unit as their Principal Residence. The Borrower
      may use a HECM for Purchase transaction to satisfy an outstanding payment obligation
      associated with a land contract, contract for deed, or other similar purchase
      arrangement that will ensure the Property will meet FHA’s title requirements.
      For additional requirements that are applicable to a HECM for Purchase transaction,
      see HECM for Purchase. (C) HECM-to-HECM Refinance HECM-to-HECM Refinance (HECM
      Refinance) refers to a new HECM where the proceeds will be used to pay off the
      property indebtedness of the current HECM and any existing eligible lien. For
      additional requirements that are applicable to a Refinance transaction, see
      HECM Refinance. ii. Borrower Eligibility (A) General Borrower Eligibility Requirements
      In order to obtain FHA-insured financing, all Borrowers must meet the eligibility
      criteria in this section. (1) Minimum Age Requirement All Borrowers must be
      at least 62 years of age as of the Closing Date. There is no maximum age limit
      for a Borrower. (2) Principal Residence (a) Definition A Non-Borrowing Spouse
      (NBS) refers to the spouse of a HECM Borrower who is also not a Borrower. Eligible
      Non-Borrowing Spouse (NBS) refers to an NBS who meets all Qualifying Attributes
      for a Deferral Period. Principal Residence refers to the dwelling where the
      Borrower and, if applicable, an NBS maintain their permanent place of abode,
      and typically spend the majority of the calendar year. A person may have only
      one Principal Residence at any one time and the Property is considered to be
      the Principal Residence: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B.
      Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 567 Last Revised: 11/26/2025 • of any Borrower who is temporarily
      in a health care institution provided the Borrower’s confinement to a health
      care institution does not exceed 12 consecutive months; • of any NBS who is
      temporarily in a health care institution, as long as the Property is the Principal
      Residence of their Borrower spouse, who physically resides in the Property;
      • of any NBS who occupies the Property as their Principal Residence, when the
      Borrower resides in a health care institution for a length of time; and • during
      a Deferral Period of the NBS, who is temporarily in a health care institution,
      provided the Eligible NBS physically occupied the Property immediately prior
      to entering the health care institution and such confinement does not exceed
      12 consecutive months. See Mortgagee Optional Election Assignment for more information.
      (b) Standard The Property must be the Principal Residence of each Borrower and
      a Borrower may have only one Principal Residence at any one time. (3) Citizenship
      and Immigration Status U.S. citizenship is not required for HECM eligibility.
      (4) Residency Requirements The Mortgagee must determine the residency status
      of the Borrower based on information provided on the mortgage application and
      other applicable documentation. A Social Security card is not sufficient to
      prove immigration or work status. The following categories of individuals are
      eligible for FHA-insured financing in accordance with the requirements set forth
      below: (a) Permanent Residents (i) Standard A Borrower with lawful permanent
      resident status may be eligible for FHA-insured financing provided the Borrower
      satisfies the same requirements, terms, and conditions as those for U.S. citizens.
      (ii) Required Documentation The HECM file must include evidence of lawful permanent
      residence and indicate that the Borrower is a lawful permanent resident on the
      RLARM. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1
      568 Last Revised: 11/26/2025 The U.S. Citizenship and Immigration Services (USCIS)
      within the Department of Homeland Security provides evidence of lawful permanent
      resident status. (b) Citizens of the Federated States of Micronesia, the Republic
      of the Marshall Islands, or the Republic of Palau (i) Standard A Borrower with
      citizenship in the Federated States of Micronesia, the Republic of the Marshall
      Islands, or the Republic of Palau may be eligible for FHA-insured financing
      provided the Borrower satisfies the same requirements, terms, and conditions
      as those for U.S. citizens. (ii) Required Documentation For Borrowers who are
      citizens of the Federated States of Micronesia, the Republic of the Marshall
      Islands, or the Republic of Palau, the HECM file must include evidence of such
      citizenship. (5) Borrower Ownership and Obligation Requirements To be eligible,
      all Borrowers must hold title, leasehold interest, or possessory interest to
      the Property in their own name or in the name of a living trust at closing,
      be obligated on the Note or credit instrument, and sign all security instruments.
      In community property states, the Borrower’s spouse is not required to be a
      Borrower. However, the Mortgage must be executed by all parties necessary to
      make the lien valid and enforceable under state law. (a) Eligibility Requirements
      for Property Held in Living Trusts (i) Definitions Living Trust refers to a
      type of trust that is created and takes effect during the creator’s lifetime.
      Trustee refers to the person charged with the administration of the Living Trust.
      Primary Beneficiary refers to a person that is first in line to receive the
      benefits of the Living Trust. Contingent Beneficiary refers to a person who
      is entitled to the benefits of the trust only upon the death of the primary
      beneficiary. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1
      569 Last Revised: 11/26/2025 (ii) Standard The Mortgagee may originate a HECM
      that is held by a Living Trust, either revocable or irrevocable, provided the
      following requirements are met: • primary beneficiaries of the Living Trust
      are 62 years of age as of the Closing Date; • primary beneficiaries attend and
      complete HECM counseling; • primary beneficiaries must be an eligible Borrower;
      • primary beneficiaries occupy the subject Property as their Principal Residence
      until the mortgage lien is released or will occupy the subject Property as their
      Principal Residence within 60 Days of Closing for a HECM for Purchase transaction;
      • new beneficiaries must not be added to the Living Trust; • primary beneficiaries
      must sign the loan agreement; • the trustee and primary beneficiaries must sign
      the Note; • the Mortgage, and other legal documents, are signed by all parties
      necessary to create a valid first Mortgage and second Mortgage, if applicable,
      which may include: • the trustee; and • primary and contingent beneficiaries;
      and • the Mortgagee has determined that the Living Trust: • is valid and enforceable;
      • provides each beneficiary with a legal right to occupy the Property for the
      remainder of their life; and • provides for a Notice to the Mortgagee of any
      changes to the trust, including occupancy status of the Property, or any transfer
      of beneficial interest in the Property. Contingent beneficiaries do not need
      to meet eligible Borrower requirements and do not need to attend HECM counseling
      unless the contingent beneficiary is an individual otherwise required to receive
      counseling, e.g., an Eligible or Ineligible NBS or Non-Borrowing Owner. The
      trustee is not required to attend HECM counseling unless the trustee is also
      a primary beneficiary or an individual otherwise required to receive counseling,
      e.g., an Eligible or Ineligible NBS or Non-Borrowing Owner. (iii)Living Trusts
      and Security Instruments The name of the Living Trust must appear on the security
      instrument, such as the Mortgage, deed of trust, or security deed. The name
      of the Borrower must appear on the security instrument when required to create
      a valid lien under state law. The name of the Borrower II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      2. Origination/Processing Handbook 4000.1 570 Last Revised: 11/26/2025 must
      also be the same name on the Note and the trust or trust documentation. The
      name of the Borrower is not required to appear on the property deed or title.
      (iv) Required Documentation The Mortgagee must obtain a copy of the trust agreement
      or the Declaration of Trust to ensure all Living Trust eligibility requirements
      are met. (b) Transfer of the Property into a Living Trust The Borrower under
      an insured HECM may transfer the Property to a Living Trust without causing
      the Mortgage to become Due and Payable if the Mortgagee finds that the Living
      Trust meets all Eligibility Requirements for Property Held in Living Trusts
      that would have applied if the trust owned the Property at Closing. The Mortgagee
      may require the trust to formally assume the Borrower’s obligation to repay
      the debt as stated in the Note if considered advisable to avoid difficulty in
      enforcement of the Note and Mortgage. (c) Transferring of the Property from
      a Living Trust If the Living Trust is terminated or the Property is otherwise
      transferred from an eligible trust that is holding the Property, the Mortgage
      will not become Due and Payable, provided that one or more of the original Borrowers:
      • continue to occupy the Property as a Principal Residence; and • continue to
      retain title to the Property in Fee Simple or on a Leasehold Interest. (d) Eligibility
      Requirements for Borrowers Holding Only Life Estates (i) Standard A Borrower
      who holds only a life estate is eligible for a HECM, only if all holders of
      any reversionary or remainder interest will also execute the Mortgage and attend
      HECM counseling. (ii) Required Documentation For life estates, the Mortgagee
      must obtain a copy of the document granting the Borrower a life estate. II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs
      Reverse Mortgages 2. Origination/Processing Handbook 4000.1 571 Last Revised:
      11/26/2025 (6) Marital Status The Mortgagee must require all Borrowers to state
      whether they are legally married at the time of initial application and confirm
      this information at closing by signing the appropriate certification. (7) Social
      Security Number (a) Standard Each Borrower must provide evidence of their valid
      SSN to the Mortgagee. Exception Individuals employed by the World Bank, a foreign
      embassy, or equivalent employer identified by HUD are not required to provide
      an SSN. (b) Required Documentation The Mortgagee must: • validate and document
      an SSN for each Borrower by: • entering the Borrower’s name, date of birth,
      and SSN in the Borrower/address validation screen through FHAC; and • examining
      the Borrower’s original pay stubs, IRS Form W-2s, Wage and Tax Statement, valid
      Tax Returns obtained directly from the IRS; or other document relied upon to
      process the HECM; and • resolve any inconsistencies or multiple SSNs for individual
      Borrowers that are revealed during HECM processing using a service provider
      to verify the SSN with the SSA. (8) Borrower Minimum Decision Credit Score (a)
      Definition The Minimum Decision Credit Score (MDCS) refers to the credit score
      reported on the Borrower’s credit report when all reported scores are the same.
      Where three differing scores are reported, the middle score is the MDCS. Where
      two differing scores are reported, the MDCS is the lowest score. Where only
      one score is reported, that score is the MDCS. (b) Standard There is no MDCS
      for a HECM. Credit scores are not a criterion for processing or evaluating a
      HECM. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 572 Last
      Revised: 11/26/2025 (9) Delinquent FHA-insured Mortgages (a) Principal Residences
      Borrowers delinquent on an FHA-insured Mortgage on their Principal Residence
      must pay off the Delinquent Mortgage prior to or at closing of the HECM. (b)
      Other FHA-Insured Mortgages Borrowers delinquent on an FHA-insured Mortgage
      that is not their Principal Residence are ineligible for a new FHA-insured HECM
      unless the delinquency is resolved. (10) Delinquent Federal Tax Debt (a) Standard
      Borrowers with delinquent Federal Tax Debt are ineligible. Federal tax liens
      may remain unpaid if the Borrower has entered into a valid repayment agreement
      with the federal agency owed to make regular payments on the debt and the Borrower
      has made timely payments for at least three months of scheduled payments. The
      Borrower cannot prepay scheduled payments in order to meet the required minimum
      of three months of payments. The Mortgagee must include the payment amount in
      the agreement in the calculation of the Borrower’s monthly expenses. Delinquent
      federal debt or tax liens may also be paid off prior to obtaining a HECM using
      the Borrower’s own funds or paid off as a Mandatory Obligation at closing. (b)
      Verification Mortgagees must check public records and credit information to
      verify that the Borrower is not presently delinquent on any Federal Tax Debt
      and does not have a tax lien placed against their Property for a tax debt owed
      to the federal government. (c) Required Documentation The Mortgagee must include
      documentation from the IRS evidencing the repayment agreement and verification
      of payments made, if applicable. The Mortgagee must include documentation from
      the IRS evidencing the payoff of the tax lien, if applicable. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 2. Origination/Processing Handbook 4000.1 573 Last Revised: 11/26/2025
      (11) Borrower Ineligibility Due to Delinquent Federal Non-Tax Debt (a) Definition
      Judgment refers to any debt or monetary liability of the Borrower created by
      a court or other adjudicating body. (b) Standard Mortgagees are prohibited from
      processing an application for an FHA-insured HECM for Borrowers with delinquent
      federal non-tax debt, including deficiency Judgments and other debt associated
      with past FHA-insured Mortgages. Mortgagees must suspend processing of the application
      until the debt has been resolved with the creditor agency. Mortgagees are required
      to determine whether the Borrowers have delinquent federal non-tax debt. Mortgagees
      may obtain information on delinquent Federal Debts from public records, credit
      reports or equivalent, and must check all Borrowers against the Credit Alert
      Verification Reporting System (CAIVRS). (c) Verification If a delinquent Federal
      Debt is reflected in a public record, credit report or equivalent, or CAIVRS
      or an Equivalent System, the Mortgagee must verify the validity and delinquency
      status of the debt by contacting the creditor agency to whom the debt is owed.
      If the debt was identified through CAIVRS, the Mortgagee must contact the creditor
      agency using the contact phone number and debt reference number reflected in
      the Borrower’s CAIVRS report. If the creditor agency confirms that the debt
      is valid and in delinquent status as defined by the Debt Collection Improvement
      Act, then the Borrower is ineligible for an FHA-insured HECM until the Borrower
      resolves the debt with the creditor agency. The Mortgagee may not deny a HECM
      solely based on the CAIVRS information that has not been verified by the Mortgagee.
      If resolved either by determining that the information in CAIVRS is no longer
      valid or by resolving the delinquent status as stated above, the Mortgagee may
      continue to process the HECM application. (d) Resolution For a Borrower with
      verified delinquent Federal Debt to become eligible, the Borrower must resolve
      their federal non-tax debt in accordance with the Debt Collection Improvement
      Act. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 574 Last
      Revised: 11/26/2025 The creditor agency that is owed the debt can verify that
      the debt has been resolved in accordance with the Debt Collection Improvement
      Act. (e) Required Documentation The Mortgagee must include documentation from
      the creditor agency to support the verification and resolution of the debt.
      For debt reported through CAIVRS, the Mortgagee may obtain evidence of resolution
      by obtaining a clear CAIVRS report. (12) Valid First and Second Liens The Mortgagee
      must ensure that the mortgaged Property will be free and clear of all liens
      or that any permissible liens are subordinated to the first HECM lien and any
      second lien held by the Commissioner. The Mortgagee must ensure there are no
      restrictions on conveyance, unless such restrictions are permitted by FHA regulations.
      An existing lien of record, unless prohibited, may be subordinated to the first
      HECM lien and any second lien held by the Commissioner if the following two
      conditions are satisfied: • the subordinate lien does not intervene between
      the first and second HECM liens; and • the subordinate lien must not arise or
      be made in connection with obtaining HECM financing. FHA regulations at 24 CFR
      206.32 provide that there must not be any outstanding or unpaid obligations
      incurred by the Borrower in connection with the HECM transaction. (a) Tax Liens
      Tax liens may remain unpaid if the Borrower has entered into a valid repayment
      agreement with the lien holder to make regular payments on the debt and the
      Borrower has made timely scheduled payments for at least three consecutive months.
      The Borrower cannot prepay scheduled payments in order to meet the required
      minimum of three months of payments. Except for federal tax liens, the lien
      holder must subordinate the tax lien to the FHA- insured HECM. For more on federal
      tax liens, see Delinquent Federal Tax Debt. (b) Court Judgment Liens Liens against
      the Property resulting from outstanding court Judgments must be paid in full
      prior to or at closing. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B.
      Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 575 Last Revised: 11/26/2025 (c) Secondary Financing A pre-existing
      Mortgage lien securing secondary financing that was provided by a Governmental
      Entity (federal, state, or local) or by an organization acting on behalf of
      a Governmental Entity must be paid in full prior to closing. If the lien is
      in connection with a real estate tax deferral program, then see Real Estate
      Tax Deferral Program. (d) Real Estate Tax Deferral Program (i) Definitions Real
      Estate Tax Deferral Program refers to a taxing authority deferring the payment
      of property taxes, i.e., liability for taxes remains, but payment is deferred
      until a certain point in the future. (ii) Standard The Mortgagee must ensure
      the Borrower is not a participant in a real estate tax deferral program unless
      such liens securing payment of deferred taxes are subordinate to the first and
      second HECM liens, and: • the real estate tax deferral period will be in place
      until the death of the Borrower or the sale of the Property, whichever occurs
      first; and • a lien superior to the first and second HECM liens will not be
      created upon the termination of the real estate tax deferral period resulting
      in any obligation for the deferred tax obligation to be repaid at the death
      or move-out of the Borrower, or any other maturity event. (iii)Required Documentation
      The Mortgagee must obtain evidence documenting the deferred taxes and lien priority.
      (B) General Non-Borrowing Spouse Requirements (1) Definitions An Ineligible
      Non-Borrowing Spouse refers to an NBS who does not meet all Qualifying Attributes
      for a Deferral Period. Qualifying Attributes refer to the criteria an NBS must
      meet to be eligible for the Deferral Period. An Eligible NBS must: • have been
      the spouse of a HECM Borrower at the time of closing and have remained the spouse
      of such HECM Borrower for the duration of the HECM Borrower’s lifetime; II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs
      Reverse Mortgages 2. Origination/Processing Handbook 4000.1 576 Last Revised:
      11/26/2025 • have been properly disclosed to the Mortgagee at origination and
      specifically named as an NBS in the HECM documents; and • have occupied, and
      continue to occupy, the Property securing the HECM as the Principal Residence
      of the NBS. A Deferral Period refers to the period of time following the death
      of the last surviving Borrower for a HECM with an FHA case number assigned on
      or after August 4, 2014, during which the Due and Payable status of a HECM is
      deferred for an Eligible NBS or Eligible Surviving NBS provided that the Qualifying
      Attributes and all other FHA requirements continue to be satisfied. (2) Marital
      Status (a) Standard At initial application, the Mortgagee must: • verify the
      name and age of any NBS on the Borrower’s application; and • determine if the
      spouse is an Eligible or Ineligible NBS. An Eligible NBS may not elect to be
      ineligible for the Deferral Period. An Eligible NBS becomes an Ineligible NBS
      and ineligible for the Deferral Period when any of the Qualifying Attributes
      cease to be met. (b) Required Documentation The Mortgagee must obtain the following:
      • a marriage certificate, legal opinion certifying the validity of the marriage,
      or other evidence sufficient to establish the legal validity of the marriage;
      • the NBS’s SSN; and • either the Ineligible NBS or Eligible NBS certification.
      (3) Social Security Number (a) Standard Each NBS must have a valid SSN. (b)
      Required Documentation The Mortgagee must: • validate and document an SSN for
      each NBS by: • entering the NBS’s name, date of birth, and SSN in the Borrower/address
      validation screen through FHAC; and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 577 Last Revised: 11/26/2025 • examining the Eligible NBS’s
      original pay stubs, IRS Form W-2s, valid Tax Returns obtained directly from
      the IRS, or other document relied upon to process the HECM; and • resolve any
      inconsistencies or multiple SSNs for individual Eligible NBS that are revealed
      during HECM processing using a service provider to verify the SSN with the SSA.
      Exception Individuals employed by the World Bank, a foreign embassy, or equivalent
      employer identified by HUD are not required to provide an SSN. (4) Non-Borrowing
      Spouse Age Limits The NBS does not have to be 62 years old for an eligible Borrower
      to obtain a HECM. (5) Principal Residence The Mortgagee must determine whether
      the Property serves as the Principal Residence of each NBS. (C) Excluded Parties
      The Mortgagee must establish that the Borrower and Eligible NBS are not Excluded
      Parties and document the determination as required below. (1) Borrower and Eligible
      NBS (a) Standard A Borrower and Eligible NBS are not eligible to participate
      in FHA-insured mortgage transactions if they are suspended, debarred, or otherwise
      excluded from participating in HUD programs. (b) Required Documentation The
      Mortgagee must check the HUD LDP List to confirm the Borrower’s and Eligible
      NBS’ eligibility to participate in an FHA-insured mortgage transaction. The
      Mortgagee must check SAM and follow appropriate procedures defined by that system
      to confirm eligibility for participation. The Mortgagee must print the results
      of the check of the HUD LDP and SAM to confirm eligibility of participation
      in the HECM program. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook
      4000.1 578 Last Revised: 11/26/2025 (2) Other Parties to the Transaction (a)
      Standard A HECM is not eligible for FHA insurance if anyone participating in
      the HECM transaction is listed on HUD’s LDP List or in SAM as being excluded
      from participation in HUD transactions. This may include but is not limited
      to: • seller (except where selling the Principal Residence) • listing and selling
      real estate agent • loan originator • loan processor • underwriter • Appraiser
      • Closing Agent • title company (b) Required Documentation The Mortgagee must
      check the HUD LDP List and SAM and follow appropriate procedures defined by
      that system to confirm eligibility for all participants involved in the transaction.
      (D) Limitation on Number of HECMs (1) Standard A Borrower with an existing HECM
      is eligible to obtain a new HECM if the Borrower provides legal documentation
      evidencing release of the Borrower’s financial obligation to satisfy the existing
      HECM. A Borrower with an existing HECM is eligible to use the HECM for Purchase
      program to obtain a new Principal Residence if they pay off the existing HECM
      before the HECM for Purchase transaction is insured. (2) Required Documentation
      The Borrower must provide a copy of: • a final divorce decree or court order
      evidencing the vacating Borrower is released from their financial obligation
      to satisfy the indebtedness of the existing HECM and recorded quit claim deed
      or other equivalent; or • evidence that the existing HECM outstanding balance
      is repaid in full, such as: • a copy of the fully executed Closing Disclosure,
      HUD-1 Settlement Statement or similar legal document; • a payoff statement and
      copy of the canceled check or its equivalent; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 579 Last Revised: 11/26/2025 • a credit report with a zero balance;
      or • a copy of the canceled check or its equivalent and a copy of the lien release.
      iii. Property Eligibility and Acceptability Criteria The Property must meet
      FHA’s definition of a HECM Property. In order to obtain FHA-insured financing,
      the Property must meet the eligibility criteria in this section. (A) General
      Property Eligibility (1) Definitions HECM Property refers to a Property that
      is either Existing Construction or New Construction which will serve as collateral
      for the HECM. Existing Construction refers to a Property that has been 100 percent
      complete for over one year or has been completed for less than one year and
      was previously occupied. New Construction refers to Proposed Construction, Properties
      Under Construction, and Properties Existing Less than One Year as defined below:
      • Proposed Construction refers to a Property where no concrete or permanent
      material has been placed. Digging of footing is not considered permanent. •
      Under Construction refers to the period from the first placement of permanent
      material to 100 percent completion with no Certificate of Occupancy (CO) or
      equivalent. • Existing Less than One Year refers to a Property that is 100 percent
      complete and has been completed less than one year from the date of issuance
      of the CO or equivalent. The Property must have never been occupied. (2) Location
      of HECM Property The HECM Property must be located within a state, District
      of Columbia, Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the
      Northern Mariana Islands, or American Samoa. (3) Hazard Insurance The Borrower
      must insure all improvements on the HECM Property, whether in existence at the
      time of origination or subsequently erected, against any hazards, casualties,
      and contingencies, including fire and flood, for which the Mortgagee requires
      insurance. Hazard Insurance must be maintained in the amount and for II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 2. Origination/Processing Handbook 4000.1 580 Last Revised: 11/26/2025
      the period of time that is necessary to protect the Mortgagee’s investment.
      Refer to the Condominium product sheet of this section of Handbook 4000.1 for
      additional insurance requirements. (4) Special Flood Hazard Areas The Mortgagee
      must determine if a Property is located in a Special Flood Hazard Area (SFHA)
      as designated by the Federal Emergency Management Agency (FEMA). The Mortgagee
      must obtain flood zone determination services, independent of any assessment
      made by the Appraiser, to cover the Life of the Loan Flood Certification. A
      Property is not eligible for FHA insurance if: • a residential building and
      related improvements to the Property are located within any SFHA Zone beginning
      with the letter A, an SFHA, or any Zone beginning with the letter V, a Coastal
      High Hazard Area, and insurance under the National Flood Insurance Program (NFIP)
      is not available in the community; or • the improvements are, or are proposed
      to be, located within the Coastal Barrier Resources System (CBRS). To be eligible
      for FHA insurance, a Property located in an SFHA must be in a community that
      participates in the NFIP and has NFIP available, regardless of whether the Borrower
      obtains NFIP coverage. (a) Flood Insurance (i) Definitions Flood Insurance refers
      to insurance provided by an NFIP or a Private Flood Insurance (PFI) policy that
      covers physical damage by floods. An NFIP policy refers to insurance managed
      by the Federal Emergency Management Agency (FEMA) that covers physical damage
      by floods. A PFI policy refers to insurance provided by a private insurance
      carrier that covers physical damage by floods. (ii) Standard Eligible Properties
      If any portion of the dwelling and related Structures or equipment essential
      to the Property Value is located in an SFHA and NFIP insurance is available
      in that community, the Mortgagee must ensure the Borrower obtains and maintains
      Flood Insurance. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II
      Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook
      4000.1 581 Last Revised: 11/26/2025 Required Flood Insurance Coverage For Properties
      located within an SFHA, Flood Insurance must be maintained for the life of the
      HECM in an amount at least equal to the lowest of the following: • 100 percent
      replacement cost of the insurable value of the improvements, which consists
      of the development or project cost less estimated land cost; • the maximum amount
      of NFIP insurance available with respect to the particular type of Property;
      or • the outstanding principal balance of the Mortgage. Where the outstanding
      principal balance of the Mortgage is used to determine the amount of Flood Insurance
      coverage, Flood insurance must be adjusted each renewal cycle to cover an amount
      at least equal to the outstanding principal balance at the end of the insurance
      coverage period. Requirements for PFI If the Borrower purchases a PFI policy
      in lieu of an NFIP policy, the Mortgagee must ensure the PFI policy meets the
      following requirements: • is issued by an insurance company that is licensed,
      admitted, or otherwise approved to engage in the business of insurance in the
      state or jurisdiction in which the Property to be insured is located, by the
      insurance regulator of the state or jurisdiction; or, in the case of a policy
      of difference in conditions, multiple peril, all risk, or other blanket coverage
      insuring nonresidential commercial property, is recognized, or not disapproved,
      as a surplus lines insurer by the insurance regulator of the state or jurisdiction
      where the Property to be insured is located; • provides Flood Insurance coverage
      that is at least as broad as the coverage provided under a standard Flood Insurance
      policy under the NFIP for the particular type of Property, including when considering
      exclusions and conditions offered by the insurer; • includes deductibles that
      are no higher than the specified maximum, and includes similar non-applicability
      provisions, as under a standard Flood Insurance policy under the NFIP; • includes
      a requirement for the insurer to provide written notice 45 Days before cancellation
      or nonrenewal of Flood Insurance coverage to the Borrower and the Mortgagee.
      In cases where the Mortgagee has assigned the loan to HUD, the insurer must
      provide notice to HUD and, where applicable, to the Borrower; • includes information
      about the availability of Flood Insurance coverage under the NFIP; • includes
      a mortgage interest clause similar to the clause contained in a standard Flood
      Insurance policy under the NFIP; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 582 Last Revised: 11/26/2025 • includes a provision requiring
      the Borrower to file suit no later than one year after the date of a written
      denial for all or part of a claim under the policy; and • contains cancellation
      provisions that are as restrictive as the provisions contained in a standard
      Flood Insurance policy under the NFIP. (iii) Private Flood Insurance Policy
      Compliance Aid Definition The Private Flood Insurance (PFI) Policy Compliance
      Aid is the statement: “This policy meets the definition of private flood insurance
      contained in 24 CFR 203.16a(e) for FHA-insured mortgages.” Standard The PFI
      Policy Compliance Aid may be made by the insurance provider, attesting that
      a PFI policy meets the requirements of Flood Insurance. The Mortgagee may rely
      on the PFI Policy Compliance Aid to determine whether a PFI policy meets the
      Flood Insurance requirements. In the absence of the PFI Policy Compliance Aid
      within the policy, a Mortgagee may review the policy to determine if it meets
      FHA requirements or rely on the insurance agent or carrier to separately provide
      the PFI Policy Compliance Aid language. (iv) Required Documentation For Properties
      located within an SFHA, the Mortgagee must include in the case binder: • a Life
      of Loan Flood Certification for all Properties; • if applicable, include a:
      • FEMA Letter of Map Amendment (LOMA); • FEMA Letter of Map Revision (LOMR);
      or • FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY- 22-152); and • a
      copy of the certificate of Flood Insurance or complete copy of the Flood Insurance
      policy, if required. (v) Required Reporting The Mortgage must report the required
      Flood Insurance information in the insurance application screen in FHAC. II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs
      Reverse Mortgages 2. Origination/Processing Handbook 4000.1 583 Last Revised:
      11/26/2025 (b) Eligibility for New Construction in SFHAs If any portion of the
      dwelling and related Structures, or equipment essential to the Property Value
      is located in an SFHA, the Property is not eligible for FHA mortgage insurance,
      unless the Mortgagee: • obtains a FEMA-issued final LOMA or LOMR that removes
      the Property from the SFHA; or • obtains a FEMA NFIP Elevation Certificate (FEMA
      Form FF-206-FY- 22-152). The Elevation Certificate must document that the lowest
      floor of the residential building, including the basement, and all related Structures
      or equipment essential to the Property Value are built above the 100-year flood
      elevation in compliance with the NFIP criteria; and • ensures the Borrower obtains
      Flood Insurance. See the HECM for Purchase product sheet for additional requirements.
      (c) Eligibility for Existing Construction in SFHAs When any portion of the residential
      improvements is determined to be located within an SFHA, Flood Insurance must
      be obtained. (d) Eligibility for Condominiums in SFHAs The Mortgagee must ensure
      the Condominium Association obtains Flood Insurance on buildings located within
      the SFHA. The Flood Insurance coverage must protect the interest of the Borrowers
      who hold title to an individual unit, as well as the common areas of the Condominium
      Project. See Flood Insurance (Existing Construction). (e) Eligibility for Manufactured
      Housing in SFHAs The finished grade level beneath the Manufactured Home must
      be at or above the 100-year return frequency flood elevation. If any portion
      of the dwelling and related Structures or equipment essential to the Property
      Value for both new and existing Manufactured Homes is located in an SFHA, the
      Property is not eligible for FHA mortgage insurance, unless the Mortgagee: •
      obtains a FEMA-issued LOMA or LOMR that removes the Property from the SFHA;
      or • obtains a FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY- 22-152)
      showing that the finished grade beneath the Manufactured Home is at or above
      the 100-year return frequency flood elevation; and • ensures the Borrower obtains
      Flood Insurance. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II
      Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook
      4000.1 584 Last Revised: 11/26/2025 (f) Restrictions on Property Locations within
      Coastal Barrier Resources System In accordance with the Coastal Barrier Resources
      Act, a Property is not eligible for FHA mortgage insurance if the improvements
      are located within the Coastal Barrier Resources System. (5) Mixed Use of Property
      Mixed Use refers to a Property suitable for a combination of uses including
      any of the following: commercial, residential, retail, office, or parking space.
      Mixed Use one- to four-unit Single Family Properties are eligible for FHA insurance,
      provided: • a minimum of 51 percent of the entire building square footage is
      for residential use; and • the commercial use will not affect the health and
      safety of the occupants of the residential Property. (6) Homeowners’ and Condominium
      Associations For Properties that are located within a Homeowners’ Association
      (HOA) or Condominium Association, the Mortgagee must conduct a review of the
      recorded Declaration and/or recorded Covenants, Conditions, and Restrictions
      (CC&R) which are in place for the association. When conducting the review, the
      Mortgagee must determine whether the recorded Declaration and/or CC&Rs require
      prior approval by the association of any non-purchase money mortgage that will
      encumber the Property. In those situations where such a requirement exists,
      the Mortgagee must obtain the approval of the association in writing prior to
      origination of the HECM. Documentation concerning this approval must be maintained
      by the Mortgagee and made available to HUD upon request. (7) Property Assessed
      Clean Energy (a) Definition Property Assessed Clean Energy (PACE) refers to
      an alternative means of financing energy and other PACE-allowed improvements
      to residential properties using financing provided by private enterprises in
      conjunction with state and local governments. Generally, the repayment of the
      PACE obligation is collected in the same manner as a special assessment tax;
      it is collected by the local government rather than paid directly by the Borrower
      to the party providing the PACE financing. Generally, the PACE obligation is
      also secured in the same manner as a special assessment against the property.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 585 Last
      Revised: 11/26/2025 (b) Standard Properties which will remain encumbered with
      a PACE obligation are not eligible for an FHA-insured HECM. To be eligible for
      FHA insurance, the PACE obligation must be paid off in full prior to or at closing.
      The Borrower may use HECM proceeds to satisfy the PACE obligation. For HECM
      for Purchase transactions, see the Property Assessed Clean Energy section of
      the product sheet. (B) Property Types FHA’s programs differ from one another
      primarily in terms of what types of Properties and financing are eligible. Except
      as otherwise stated in this Handbook 4000.1, HECMs are limited to one- to four-unit
      Single Family Properties where the Borrower occupies one unit as their Principal
      Residence. FHA insures HECM financing on Real Property secured by: • detached
      or semi-detached dwellings • Manufactured Housing • townhouses or row houses
      • Condominium Units and Site Condominiums FHA will not insure HECMs secured
      by: • commercial enterprises • cooperative units • boarding houses • hotels,
      motels, and condotels • tourist houses • private clubs • bed and breakfast establishments
      • other transient housing • Vacation Homes • fraternity and sorority houses
      (1) One-Unit A one-unit Property is a Single Family residential Property with
      a single Dwelling Unit, or with a single Dwelling Unit and a single ADU. (2)
      Two-Unit (a) Definition A two-unit Property is a Single Family residential Property
      with two individual dwellings. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 586 Last Revised: 11/26/2025 (b) Standard The Mortgagee must
      obtain a completed form HUD-92561. (3) Three- to Four-Unit A three- to four-unit
      Property is either: • a Single Family residential Property with three to four
      individual Dwelling Units; or • a Single Family residential Property with two
      individual Dwelling Units and one ADU or three individual Dwelling Units and
      one ADU. The Mortgagee must obtain a completed form HUD-92561. (4) Accessory
      Dwelling Unit (a) Definition An Accessory Dwelling Unit (ADU) refers to a single
      habitable living unit with means of separate ingress and egress that meets the
      minimum requirements for a living unit. An ADU is a private space that is subordinate
      in size and within, or detached from a primary one-unit Single Family dwelling,
      which together constitute a single interest in real estate. (b) Standard A Single
      Family residential one-unit Property with a single ADU remains a one-unit Property.
      For any Single Family residential Property with two or more units, a separate
      additional Dwelling Unit must be considered as an additional unit. (5) Condominium
      Unit (a) Definitions A Condominium Unit refers to real estate consisting of
      a one-family Dwelling Unit in a Condominium Project. Condominium Project refers
      to a project in which one-family Dwelling Units are attached, semi-detached,
      detached, or Manufactured Home units, and in which owners hold an undivided
      interest in Common Elements. (b) Standard A Condominium Unit must be either
      located within an FHA-approved Condominium Project, meet FHA’s definition of
      a Site Condominium, or have II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 587 Last Revised: 11/26/2025 completed the FHA Single-Unit Approval
      process before a Mortgage can be insured. (6) Site Condominiums (a) Definition
      A Site Condominium refers to: • a Condominium Project that consists entirely
      of Single Family detached dwellings that have no shared garages, or any other
      attached buildings; or • a Condominium Project that: • consists of Single Family
      detached or horizontally attached (townhouse-style) dwellings where the Unit
      consists of the dwelling and land; • does not contain any Manufactured Housing
      Units; and • is encumbered by a declaration of condominium covenants or a condominium
      form of ownership. (b) Standard Manufactured Housing condominium units may not
      be processed as Site Condominiums. The Unit owner must be responsible for all
      required insurance and maintenance costs associated with the Unit dwelling,
      excluding landscaping, of the Site Condominium. Site Condominiums do not require
      Condominium Project Approval or Single- Unit Approval. (7) Manufactured Housing
      (a) Definition Manufactured Housing is a Structure that is transportable in
      one or more sections. It may be part of a Condominium Project, provided the
      project meets applicable FHA requirements. (b) Standard To be eligible for FHA
      mortgage insurance as a Single Family Title II HECM, all Manufactured Housing
      must: • be designed as a one-family dwelling; • have a floor area of not less
      than 400 square feet; • have the HUD Certification Label affixed or have obtained
      a letter of label verification issued on behalf of HUD, evidencing the house
      was II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 588 Last
      Revised: 11/26/2025 constructed on or after June 15, 1976, in compliance with
      the Federal Manufactured Home Construction and Safety Standards; • be classified
      as real estate (but need not be treated as real estate for purposes of state
      taxation); • be built and remain on a permanent chassis; • be designed to be
      used as a dwelling with a permanent foundation built in accordance with the
      Permanent Foundations Guide for Manufactured Housing (PFGMH); and • have been
      directly transported from the manufacturer or the dealership to the site. (c)
      Required Documentation (i) HUD Certification Label If the appraisal indicates
      the HUD Certification Label is missing from the Manufactured Housing unit, the
      Mortgagee must obtain label verification from the Institute for Building Technology
      and Safety (IBTS). (ii) PFGMH Certification The Mortgagee must obtain a certification
      by an engineer or architect, who is licensed/registered in the state where the
      Manufactured Home is located, attesting to compliance with the PFGMH. The Mortgagee
      may obtain a copy of the foundation certification from a previous FHA-insured
      Mortgage, showing that the foundation met the guidelines published in the PFGMH
      that were in effect at the time of certification, provided there are no alterations
      and/or observable damage to the foundation since the date of the original certification.
      If the Appraiser notes additions or alterations to the Manufactured Housing
      unit, the Mortgagee must ensure the addition was addressed in the foundation
      certification. If the additions or alterations were not addressed in the foundation
      certification, the Mortgagee must obtain: • an inspection by the state administrative
      agency that inspects Manufactured Housing for compliance; or • certification
      of the structural integrity from a licensed structural engineer if the state
      does not employ inspectors. (C) Property Valuation The Mortgagee is responsible
      for obtaining an appraisal to verify the value of the Property and the Property’s
      compliance with HUD’s MPR or MPS. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing
      Handbook 4000.1 589 Last Revised: 11/26/2025 (1) Integrity of Valuation Process:
      Communications with Mortgagees The Mortgagee must ensure the integrity of the
      valuation process by ensuring the valuation process is free from conflicts of
      interest and the appearance of conflicts of interest. (a) Standard The Mortgagee
      must prevent its staff, or any person who is compensated on a commission basis
      upon the successful completion of a HECM, or who reports, ultimately, to any
      officer of the Mortgagee not independent of the HECM production staff and process,
      from having substantive communications with an Appraiser relating to or having
      an impact on valuation, including ordering or managing an appraisal assignment.
      Normal communications necessary to processing of a case is permissible but cannot
      attempt to influence the Appraiser. The underwriter who has responsibility for
      the quality of the appraisal report is allowed to request clarifications and
      discuss with the Appraiser components of the appraisal that influence its quality.
      (b) Exception for Smaller Mortgagees When absolute lines of independence cannot
      be achieved because of the Mortgagee’s small size and limited staff, the Mortgagee
      must clearly demonstrate that it has prudent safeguards to isolate its collateral
      evaluation process from influence or interference from its HECM production process.
      (2) Communications with Third Parties The underwriter may request a clarification
      or reconsideration of value from the Appraiser, following the requirements in
      Reconsideration of Value. The Mortgagee may not discuss the contents of an appraisal
      with anyone other than the Borrower. (3) Verifying HUD’s Minimum Property Standards/Minimum
      Property Requirements As the onsite representative for the Mortgagee, the Appraiser
      provides preliminary verification that a Property meets the Property Acceptability
      Criteria, which include HUD’s MPR or MPS. When examination of a Property reveals
      noncompliance with the Property Acceptability Criteria, the Appraiser must note
      all repairs necessary to make the Property comply with HUD’s Property Acceptability
      Criteria, together with the estimated cost to cure. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      2. Origination/Processing Handbook 4000.1 590 Last Revised: 11/26/2025 iv. Legal
      Restrictions on Conveyance (Free Assumability) The Mortgagee must determine
      that any legal restrictions on conveyance conform with the requirements in 24
      CFR § 206.45(e). In accordance with 24 CFR § 203.41(d)(1)(ii), FHA considers
      a reasonable share of appreciation to be at least 50 percent. HUD does not object
      to affordable housing programs whereby the homeowner’s share of appreciation
      is on a sliding scale beginning at zero, provided that within two years the
      homeowner would be permitted to retain 50 percent of the appreciation. If the
      program sets a maximum sales price restriction, the Borrower must be permitted
      to retain 100 percent of the appreciation. A Property that contains leased equipment,
      or operates with a leased energy system or Power Purchase Agreement (PPA), may
      be eligible for FHA-insured financing but only when such agreements are free
      of restrictions that prevent the Borrower from freely transferring the Property.
      Such agreements are acceptable, provided they do not cause a conveyance (ownership
      transfer) of the insured Property by the Borrower to: • be void, or voidable
      by a third party; • be the basis of contractual liability of the Borrower (including
      rights of first refusal, preemptive rights or options related to a Borrower’s
      efforts to convey); • terminate or be subject to termination all or part of
      the interest held by the Borrower; • be subject to the consent of a third party;
      • be subject to limits on the amount of sales proceeds a Borrower can retain
      (e.g., due to a lien, “due on sale” clause, etc.); • be grounds for accelerating
      the insured HECM; or • be grounds for increasing the interest rate of the insured
      HECM. Any restrictions resulting from provisions of the lease or PPA do not
      conflict with FHA regulations unless they include provisions encumbering the
      Real Property or restricting the transfer of the Real Property. Legal restrictions
      on conveyance of Real Property (i.e., the house) that could require the consent
      of a third party (e.g., energy provider, system owner, etc.), include but are
      not limited to, credit approval of a new purchaser before the seller can convey
      the Real Property, unless such provisions may be terminated at the option of,
      and with no cost to, the owner. If an agreement for an energy system lease or
      PPA could cause restriction upon transfer of the house, the Property is subject
      to impermissible legal restrictions and is generally ineligible for FHA insurance.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 3. Allowable Mortgage Parameters Handbook 4000.1
      591 Last Revised: 11/26/2025 3. Allowable Mortgage Parameters The Mortgagee
      must determine the Borrower’s creditworthiness, financial capacity, and available
      capital to support the HECM. The Mortgagee must also examine the Property to
      ensure it provides sufficient collateral for the HECM. For each HECM the FHA
      insures, the Mortgagee must fully comply with the following underwriting procedures.'
  judgment: false
