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FHA – Refinancing an Inherited Property With a Reverse Mortgage
Question:
We currently have a borrower who has inherited a property, and the current mortgage is a reverse mortgage. We want to confirm whether the borrower is eligible to refinance with FHA for cash-out or rate-and-term.
Answer:
The inheriting party will need to contact the servicer of the reverse mortgage to let them know their intent to refinance and stop the foreclosure process that will automatically occur if no contact or loan payoff is made. FHA allows a cash-out refinance or a rate and term refinance on an inherited property, as long as the borrower will use the property as a primary residence. FHA waives the requirement of occupancy for the past 12 months on a cash-out refinance when a property is inherited.
Reference:
FHA published the following information regarding inherited homes with reverse mortgages. https://www.hud.gov/sites/dfiles/SFH/documents/inheriting_hecm_09-23-19.pdf
MortgageGuidelines.com Resource:
MortgageGuidelines.com links this HUD document under ‘Guideline References’ in the ‘Charts & Checklists’ section of the ‘Reverse Mortgage’ section.