Will HUD pay a claim on an FHA-insured mortgage that has a superior lien in first position?

No, HUD will not pay a claim on a Mortgage that lacks first priority position. The Mortgagee must preserve the first-lien status of the FHA-insured Mortgage.

Any questions may be directed to the FHA Resource Center Toll-Free Telephone Number at (800) CALLFHA (225-5342) or by email to answers@hud.gov.  Persons with hearing or speech impairments may reach this number by calling the Federal Relay Service at (800) 877-8339. 

For policy information see Handbook 4000.1 Section III.A.2.f. 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-03996