A recorded contractor mechanic’s lien typically stops reverse mortgage eligibility until it is paid or released. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. Title still has to insure a first-lien HECM under 24 CFR 206.35. A mechanic’s lien is a live cloud. A kitchen-table peace treaty is not a recorded release.
Take an Oxnard homeowner named Thea, 68, whose roofer recorded after a payment fight. Occupancy is true. Age is true. None of that clears Schedule B. The file waits on a release, a payoff, or a bond title will accept.
A HECM remains FHA-insured. A mechanic’s lien is not a government contractor-court.
Does an unpaid contractor automatically deny a HECM?
The recorded lien denies a first-lien close until it is cleared. An unrecorded invoice is a debt on residual income, not necessarily a title exception. The prelim decides which you have. Do not hide the invoice and hope. If work was recent, the contractor may still have a recording window under state mechanic’s-lien statutes. California and Arizona clocks differ. HUD’s first-lien requirement does not.
This page is the contractor claim. Judgment lien eligibility is a court award. HOA lien is association arrears. Outstanding permit is the city’s open job. Stay here for the recorded labor or materials claim.
Leftover cash after the demand still models in the mid-30s to low-50s of value after age and expected rate. I will not quote a live cell. Run the calculator with the payoff, not without it.
When can 24 CFR 206.36 block paying the lien from HECM proceeds?
When the non-HECM lien is unseasoned and cash to the borrower would exceed $500. The rule shall not prohibit paying a lien that has been in place more than twelve months, or a structure with $500 or less cash to the borrower. A last-month recording plus a large leftover draw is the file 206.36 is built to catch. Paying from other funds, waiting, or using the $500 structure are the legal forks. A slogan is not.
Mortgagee Letter 2017-12 still charges 2.00% initial MIP of claim amount after the lien is cleared. Annual MIP is 0.50% of outstanding balance. 2026 files still use the $1,249,125 cap in Mortgagee Letter 2025-22. Origination is still capped at $6,000 under 24 CFR 206.31. A roofer dispute does not discount MIP.
If residual income requires a LESA, that set-aside is still origination-only. A LESA does not pay Thea’s roofer.
Counseling still costs $125–$175. The HUD certificate lasts 180 days. California Civil Code 1923.2(k) still adds seven days after counseling on the Oxnard file. Do not start that clock while the lien is unreleased.
How is a bonded off mechanic’s lien different from a paid release?
Some title companies will insure over a bond. That is a title overlay, not a HUD form I will invent. Confirm it with the underwriter and the title officer. A recorded release is cleaner.
A second geography: a 74-year-old in Surprise whose Arizona mechanic’s lien used a different statutory caption than California’s. The recorder’s stamp, not the caption, is the exception.
An adjustable HECM after a release still accrues at 1-month CMT plus lender margin. Expected rate still rounds to 0.125% under 24 CFR 206.3.
Jay still quotes about 30 days on a complete refinance after the release records, not while the contractor fight is open.
Who should not originate hoping title will miss the mechanic’s lien?
This path does not help a household that wants me to close and “settle with the roofer later.” I will not. It does not help a household whose unseasoned lien cannot be paid from proceeds under 24 CFR 206.36 and who still wants a large cash draw.
Heirs who later keep Thea’s house repay the outstanding loan balance under 24 CFR 206.125(a)(2)(i). A paid contractor does not rewrite that subsection.
I work with multiple lenders. I will originate after the mechanic’s lien is cleared. I will turn away a recorded labor claim whose owner wanted the line this month.
Thea’s Oxnard release is a recorded instrument. A text from the roofer is not. Surprise captions differ. HUD’s first-lien test does not. If 24 CFR 206.36 blocks paying an unseasoned claim from proceeds, use other funds, wait twelve months, or accept the $500 cash structure. Do not hope title misses the recorder’s stamp.
What if the contractor recorded in the wrong county?
Then title in the property county may not show the lien, and a later recording still can. I will not originate a hide-the-invoice plan. Thea’s Oxnard roof fight is a recorded claim or it is an unrecorded debt on residual income. The prelim decides which. California and Arizona mechanic’s-lien clocks differ. HUD’s first-lien requirement under 24 CFR 206.35 does not.
24 CFR 206.36 still blocks paying an unseasoned non-HECM lien from HECM proceeds when leftover cash to the borrower would exceed $500. Waiting until the lien is older than twelve months, paying from other funds, or using the $500 structure are the statutory forks. A slogan is not. Surprise, Arizona, captions differ from Ventura County captions. The recorder’s stamp, not the caption, is the exception.
A bond some title companies will insure over is a title overlay. Confirm it with the underwriter and the title officer. A recorded release is cleaner.