14.19.2 Lien Priority

A. The FHA mortgage lien is required by statute to be in first position ahead of all other financing. Restrictive covenants with no monetary obligations are not considered liens and, in some instances, may facilitate a transaction if affordability use restrictions other than the Tax Credit LURA survives foreclosure and is recorded prior to the FHA mortgage. On a case-by-case basis HUD may approve non-monetary use restrictions that run with the land and therefore may be superior in priority to HUD’s first mortgage position. When waivers are requested, the Lender must demonstrate, and the HUD Underwriter must verify, sufficient financial strength and strong mitigants to offset the risk of a negative impact on the marketability of the project in the event of a foreclosure or loan sale. Mitigants might include a low FHA loan-to-value or loan-to-cost ratio, significant amounts of public funds, high levels of funding by the source in question, Section 8 assistance for all the units, and higher than minimum debt service coverage.