The borrower must pay off any liens against the subject property and any federal debts.

On a HECM used for a refinance: Liens must be paid off at closing with the HECM proceeds and the payoff letter from the trustee; or Provide the court order signed by the judge indicating the borrower does not need to pay off the bankruptcy and that the borrower is authorized to proceed with the Reverse Mortgage. This permission issued by the court must specify that the mortgage may be an adjustable rate mortgage, if applicable.

On a HECM used for a purchase: Please provide documentation to show all of the following conditions have been met:
• at least 12 months of the pay-out period under the bankruptcy has elapsed at the time of the FHA Case Number Assignment,
• all required payments have been made on time and
• the borrower has received a written permission from the bankruptcy court signed by the judge to enter into the Reverse mortgage transaction