When can the Mortgagee approve a partial release of security without obtaining prior FHA approval?

The Mortgagee may execute a partial release of security without HUD approval if the partial release results from condemnation and the following HUD’s conditions are met:
  • the portion of the Property being conveyed does not exceed 10 percent of the area of the mortgaged Property;
  • there is no damage to existing Structures or other improvements;
  • there is no unrepaired damage to sewer, water, or paving;
  • the Mortgagee has applied all of the payment received as compensation for the taking of the Property to reduce the unpaid principal balance of the Mortgage; and
  • the government action requiring conveyance occurs after insurance of the Mortgage.
For policy information see:
Handbook 4000.1, Section III.A.1.j.iii.(A) available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

 


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-03560