Are borrowers with delinquent federal tax debt or tax liens eligible for a Home Equity Conversion Mortgage (HECM)?

HECM Borrowers with delinquent federal tax debt are ineligible.  Mortgagees (Lenders) must suspend processing of the application until the delinquency has been resolved with the creditor agency. 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 agreed payment amount in the borrower’s expenses when calculating residual income.

Mortgagees must check public records and credit information to verify that the borrower is not presently delinquent on any federal debt and does not have a tax lien placed against their property for a debt owed to the federal government.

The Mortgagee must include documentation from the IRS evidencing the repayment agreement and verification of payments made, if applicable.

For additional information see Mortgagee Letter 2016-10 and the attached revised HECM Financial Assessment and Property Charge Guide, Section 2.23 at

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-04604