Assistant Secretary for Housing-Federal Housing Commisioners
April 12, 2007
MORTGAGEE LETTER 2007-06
TO: ALL FHA-APPROVED MORTGAGEES
SUBJECT: Home Equity Conversion Mortgage Program –
Existing Property Eligibility Requirements
This Mortgagee Letter clarifies the Federal Housing Administration’s (FHA) definition of existing properties that may serve as security for FHA Home Equity Conversion Mortgages (HECM).
Background:
Paragraph 3-4 of Handbook 4235.1, REV-1, as modified by Mortgagee Letter 96-15, provides that existing one-to-four unit properties are eligible under the HECM program.
Clarification of FHA Policy for Lenders
For the HECM program, FHA defines “existing properties” as those where construction has been completed and the property is habitable. For example, if the prospective borrower occupies a property that has been recently constructed, lenders can ensure that construction is complete and habitable by reviewing the Certificate of Occupancy, or its equivalent, that has been issued by the local jurisdiction. Therefore, lenders are required to ensure that the property, when used as collateral for the HECM, meets the following existing property requirements:
• Serves as the principal residence of the borrower;
• Construction is complete and the property is habitable;
• HECM proceeds are not used to acquire the property; and
• Any loan that financed the construction and/or purchase of the home is satisfied and the HECM assumes the first lien position.
If you have any questions regarding this Mortgagee Letter, please contact the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342), toll free.
Sincerely,
Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
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