October 24, 2021

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FHA Loans, Seasoning Requirements and Legal Assistance: A Reader Question


A reader asks, “Have a question on issue of a legal settlement made on property ,, money to settle suit was borrowed on a promossory note and given to attorneys… few months later owner gave a lien to individual in case of untimely death , deed clearly states that it was NOT a home equity loan and title company agrees that the property is not subject to home equity rules etc,,

A reverse mortgage lender tells me that it has to be seasoned as a home equity loan which kills the loan My attorney has shown lender that money borrowed from individual went to settlement funds and small attorney fee and was not an equity loan! There was no HUD or closing,, the lender gave me a clear deed! Surly there is some kind of exception for legal settlements to any seasoning requirements?
Please respond ASAP to email (email address deleted).”

We don’t give legal advice here and cannot do anything aside from recommend that borrowers or potential borrowers in these circumstances contact a legal expert well versed in real estate law and state laws that may affect transactions like these.

Borrowers should know that an important factor in cases like these where the lender makes a determination (see the second paragraph of the reader question), that lender’s standards apply–the FHA cannot force a lender to make a home loan.

As long as lender standards are applied according to federal law and the Fair Housing Act, the determination made is based on lender discretion if it is not already covered by FHA loan rules that are key to the program’s existence.

FHA minimums and standards never override state or local laws, and lender standards may be higher than FHA loan minimums.

What is permissible with one lender or financial institution may not be permitted at another. The borrower’s best course of action in addition to getting more legal help may be to shop around for a lender willing to work with the circumstances, if possible.

Do you have questions about FHA home loans or refinance loans? Ask us in the comments section. All questions and comments are held for review.

Joe Wallace - Staff Writer

By Joe Wallace

January 27, 2015

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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