Reverse Mortgage With Tax Liens
Back property taxes, a federal tax lien or a judgment does not always rule out a HECM. Some of these debts can be paid at closing from loan proceeds, and some must be resolved first.
What can be paid at closing
HUD limits what HECM proceeds can pay off at closing to a list it calls mandatory obligations.
- Delinquent federal debt is a mandatory obligation that can be paid off at closing.
- Judgment liens recorded against the property can be paid off at closing with HECM proceeds.
- Judgments that are not recorded against the property must be paid by the borrower from their own funds.
- Property tax and insurance payments the lender requires at closing are also mandatory obligations.
- Liens from outstanding court judgments must be paid in full before or at closing.
- Delinquent federal debt or tax liens can also be paid off before the HECM with the borrower’s own funds.
Proceeds can clear property liens
Repayment plans can count
Hardship is weighed in context
A set-aside can cover taxes
CAIVRS errors can be cleared
Insurance gaps can be fixed
How HUD Reviews Tax Problems
Federal tax debt, other federal debt and property taxes each follow their own HUD rule.
Borrowers with delinquent federal tax debt are ineligible. A federal tax lien may stay unpaid if the borrower has a valid repayment agreement with the agency owed and has made timely payments for at least three months, without prepaying to reach that minimum. Otherwise the debt can be paid off before the HECM with the borrower’s own funds, or paid off as a mandatory obligation at closing.
Delinquent federal non-tax debt, including deficiency judgments from past FHA-insured mortgages, stops the application until it is resolved with the creditor agency. Every borrower is checked against CAIVRS, the Credit Alert Verification Reporting System. A HECM cannot be denied based only on CAIVRS information the lender has not verified.
HUD reviews 24 months of property tax payment history for all owned real estate. History is satisfactory when all property taxes and HOA, condo and PUD fees are current at application with no delinquencies in the previous 24 months. If it is not satisfactory and no extenuating circumstances can be documented, a fully funded Life Expectancy Set-Aside is required at a minimum.
Why choose Saxton for a reverse mortgage with liens or back taxes
This page is for homeowners with a tax lien, judgment or past-due property taxes, and for adult children sorting out a parent’s finances.
We Request Every Payoff Demand
We order payoff demands for all tax liens and judgments. Our closing review checks whether delinquent federal and state taxes and judgments are paid off with closing.
Other Tax Liens Need Subordination
A non-federal tax lien can stay in place only if you have a valid repayment agreement with the lien holder, have made at least three consecutive months of timely payments, and the lien holder subordinates it to the HECM. Federal tax liens follow the separate IRS repayment rule.
Credit Scores Are Not Used
Our reverse mortgage program has no minimum credit score. A new credit report is still pulled on every loan, and HUD requires it to include reported judgments and tax liens.
Judgments Get A Closer Look
Whatever the amount, the lender must decide whether a judgment came from disregard for obligations, an inability to manage debt, or extenuating circumstances.
Card Debt Stays Outside Closing
Under our reverse mortgage program, revolving, installment or other debts not attached to the property cannot be paid off at a HECM closing. Those need a separate plan.
Hardship Is Considered
HUD tells lenders to consider that some borrowers seek a HECM because of financial difficulties, and to weigh how the loan could solve them.
Hear From Homeowners Like You
Frequently Asked Questions
These are the questions we hear most from borrowers and families dealing with liens, judgments or back taxes.
Possibly. Property tax payments the lender requires at closing are mandatory obligations that are paid off. HUD also reviews 24 months of tax history, and if it is not satisfactory and no extenuating circumstances are documented, a fully funded LESA is required at a minimum.
Yes. Delinquent federal debt is a mandatory obligation that can be paid off at closing. Or the lien can stay unpaid if you have a valid IRS repayment agreement and have made timely payments for at least three months.
It is the Credit Alert Verification Reporting System, and every borrower is checked against it. If it shows a delinquent federal debt, the lender verifies it with the agency owed. A clear CAIVRS report can show the debt was resolved.
Examples include a VA-guaranteed mortgage, a Title I loan, a federal student loan, a Small Business Administration loan and delinquent federal taxes. The borrower is not eligible until the account is brought current, paid, otherwise satisfied, or put on a satisfactory repayment plan verified in writing.
Only if it is recorded against the property. HUD requires court-ordered judgments to be paid off before or at closing. Under our reverse mortgage program, judgments not recorded against the property must be paid from your own funds.
24 months for all owned real estate, including a previous principal residence if you moved in that time. Hazard and flood insurance are reviewed for 12 months of continuous coverage, and if coverage lapsed you must buy and prepay 12 months at or before closing.
No. Under our reverse mortgage program, revolving, installment or other debts not attached to the property cannot be paid off at a HECM closing. HUD also says judgments that are not liens against the property cannot be paid with HECM proceeds.
Saxton Mortgage does. Delinquent federal debt, such as an IRS tax lien, can be paid off at a HECM closing, or the lien can stay unpaid if you have a valid repayment agreement and have made timely payments for at least three months.
Find out what you qualify for
Tell us about the liens, judgments or back taxes on your record, and we will check how it fits our program.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.