The FHA handbook 4000.1 I.B.4.b.iii.(B)(3)(b) provides certain requirements for second liens. These requirements apply to both government agencies, and non-profit agencies that offer secondary mortgages in conjunction with an FHA first lien (generally State housing agencies). These guidelines require that “restrictions on conveyance must automatically terminate if title to the mortgaged property is transferred by foreclosure or Deed in Lieu (DIL) of Foreclosure, or if the Mortgage is assigned to the Secretary.”
In accordance with the HUD requirement, we have added the ability to insert language on our Security Instruments that will terminate the restrictions automatically on a second lien. The trigger for this language is field “Print HUD Insurance Clause,” (106023). When “Yes” is selected, the language will print on the security instrument. The language triggered is:
HUD Insurance. Notwithstanding any provision in this [Mortgage or Deed of Trust] to the contrary, the provisions of the HUD purchase money [mortgage or deed of trust] recorded concurrently herewith shall control to the extent that its provisions conflict with the provisions of this [Mortgage or Deed of Trust]. Moreover, any legal restrictions on conveyance of the property contained herein, or in any other loan document associated with the loan secured by this [Mortgage or Deed of Trust], will automatically terminate if title to the property is transferred by foreclosure or deed in lieu of foreclosure or if this [Mortgage or Deed of Trust] is assigned to the Secretary of HUD.
These changes will be in effect on January 19th, 2017 . If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
DRs 215896, 215930, and 215954