HUD Guidelines 24 CFR 206.125

HUD Guidelines 24 CFR 206.125 refers to specific regulations under the Department of Housing and Urban Development (HUD) governing the sale of properties that were secured by reverse mortgages insured by the Federal Housing Administration (FHA). This regulation comes into play when a reverse mortgage loan goes into default, or when the borrower has passed away or permanently left the home. The lender then forecloses on the property, and the property is offered for sale by HUD.

Here’s a breakdown of what 24 CFR 206.125 covers:

Key Provisions of 24 CFR 206.125:

1. Foreclosure and Sale Process:
   • The property becomes part of HUD’s inventory after the reverse mortgage is no longer active (often due to death or the borrower leaving the home).
   • HUD takes possession of the property and offers it for sale to recover the mortgage balance.
2. Non-Negotiable Terms:
   • HUD sets strict, non-negotiable terms for the sale of these properties. Buyers must comply with these terms, which means offers must meet the listed price without negotiation.
   • The sale is “as-is”, meaning HUD will not make any repairs to the property, and buyers must accept the home in its current condition.
3. Inspection and Appraisal:
   • The property is typically appraised by HUD before listing, and the appraisal sets the sale price.
   • The property is sold at or above the appraised value, and buyers are encouraged to conduct their own inspections, as HUD will not address any deficiencies found after the sale.
4. Cash or FHA Financing:
   • These properties can be purchased either with cash or FHA financing. However, certain repair issues may disqualify the home from FHA financing.
5. Strict Timeline for Buyers:
   • Buyers must adhere to strict timelines for making offers, inspections, and closing, as outlined by HUD.
   • There are specific deadlines for submitting offers and completing the purchase, typically with little flexibility for extensions.
6. Owner-Occupancy Requirement:
   • If a buyer is using FHA financing, they are required to occupy the home as their primary residence.

Why This Regulation Exists:

• 24 CFR 206.125 ensures that HUD can recover losses on reverse mortgage loans by selling the properties in a streamlined and efficient manner.
• It provides a consistent framework for selling homes that were foreclosed upon due to a reverse mortgage becoming due and payable, often after the homeowner’s death.

This rule can present opportunities for buyers, but the strict non-negotiable terms and “as-is” nature of the sale make it crucial to fully understand the condition of the property and the obligations involved.