A gifted house can support a HECM when the donee is 62, is on title, occupies as a principal residence, and any liens can be cleared. Jay Zayer, a CRMP licensed in California and Arizona, reads title and occupancy, not a twelve-month ownership myth. 24 CFR 206.35 and 24 CFR 206.33 are title and age. They are not a twelve-month ownership statute. A recent gift plus a new cash-out lien is the file 24 CFR 206.36 is built to catch.
Picture a homeowner who received a grant deed from a parent last spring, moved in, and now wants the property taxes and a thin reserve funded without a required monthly principal-and-interest coupon. If that donee is 62, occupies, and title is in the donee’s name with no unseasoned cash-out sitting behind the gift, the file can be an ordinary HECM origination. HUD does not reject a house because the consideration on the deed was love and affection.
A HECM is FHA-insured. It is not a government benefit and it is not a gift-tax clearance program.
Does a gifted deed satisfy 24 CFR 206.35 if the donee is on title?
It can. 24 CFR 206.35 requires a living borrower on title and requires the mortgagors together to hold the entire property that will secure the loan. A completed gift that recorded in the donee’s name meets the vesting half of that test. Age is still 24 CFR 206.33. Occupancy is still 24 CFR 206.39. Counseling is still 24 CFR 206.41.
Here is what that looks like in practice: a 64-year-old named Dominic in Merced is the only name on a recorded gift deed, lives in the house, and has no purchase-money mortgage. That is a title-and-occupancy file. It is not the recently purchased home myth that HUD forces a one-year wait after every new deed. 24 CFR 206.53 is HECM-to-HECM refinance only.
If the donor is still on title, the gift is incomplete for HECM purposes. The donor must deed off or sign the mortgage as a non-borrowing owner and sign the 206.35(d) certification. A kitchen-table “it’s yours now” is not a recorded conveyance.
A Cottonwood file uses the same federal sections. Arizona recording of a gift deed looks different at the county window. HUD’s borrower-on-title rule does not. A typical close is about 30 days after a complete file. That is not a guarantee. A missing deed-off is how 30 days becomes a new counseling certificate.
When does a recent gift plus a new cash-out lien trip 24 CFR 206.36?
When someone is gifted the house and then immediately places a cash-out HELOC or a new second “to pull equity before the reverse.” 24 CFR 206.36 is about existing non-HECM liens. The Commissioner may set a seasoning period. 24 CFR 206.36 still lets a seasoned non-HECM lien, or a $500-or-less cash-out, be paid from HECM proceeds on a gifted house.
A gift deed dated last month with a cash-out second dated last week is not a seasoning-free HECM cash-out. Paying the second from other funds, waiting until it is older than twelve months, or using a $500-or-less cash-to-borrower structure are the legal forks. Using leftover HECM cash to retire an unseasoned cash-out and still walk away with a large check is the fail.
A cash gift of the house with no other liens is not a 206.36 file. The statute is about liens, not about how you acquired the equity.
A gift deed does not cut the 2.00% initial MIP of maximum claim amount (Mortgagee Letter 2017-12). The 2026 claim-amount cap is $1,249,125 (Mortgagee Letter 2025-22). Origination is still capped at $6,000 under 24 CFR 206.31. Counseling still costs $125–$175, and the certificate lasts 180 days. A gift deed does not shrink those HUD charges. A gifted house still produces HECM capacity in HUD’s mid-30s to low-50s published band at typical expected rates. Model leftover cash after any required payoff.
A California gift-deed reverse mortgage still waits seven days after counseling under Civil Code section 1923.2(k). An Arizona gift-deed HECM skips Civil Code 1923.2 and still needs HUD counseling under 24 CFR 206.41. The order of those clocks is in the closing-process article.
Is the IRS gift-tax return a HUD underwriting exhibit?
No. Gift tax is a CPA conversation, usually for the donor. HUD does not underwrite Form 709. A filed return does not approve a HECM. A missing return does not, by itself, fail 24 CFR 206.35. Do not ask the underwriter for a gift-tax opinion, and do not ask a CPA for a principal-limit factor.
If the donor reserved a life estate, remaindermen who executed the mortgage are treated as mortgagors for 24 CFR 206.35. That is a title structure, not a gift-tax structure. If the house is still in the donor’s revocable trust, the trust review is a different page.
A Life Expectancy Set-Aside, if required, is origination-only. It holds future taxes and insurance. It does not cure a donor who is still on title.
Heirs who later keep a gifted-then-HECM house repay the outstanding balance under 24 CFR 206.125(a)(2)(i). A gifted house that later carries a HECM is still that payoff, not a canceled gift.
Who should not originate on a house that is still in the donor’s name?
This path does not help a donee who occupies a house the parent never deeded. 24 CFR 206.35 is the stop. Jay will send that file to a title attorney, not to a counselor, until the deed records. It does not help a household whose unseasoned cash-out second cannot be paid from HECM proceeds under 24 CFR 206.36 and who still wants a large leftover draw.
What can go wrong: counseling is completed in the donee’s name, the certificate starts aging, and title still shows the donor. Or the family treats a completed gift as a recently purchased “wait a year” myth and wastes a year they did not owe HUD. Or someone uses the gift as a flip they will not occupy. 24 CFR 206.39 fails that file.
A follow-up: if the donee is 61, a gifted house does not create a HUD age exception. 24 CFR 206.33 is still 62 at closing. In California, a proprietary program that starts at 55 is a private contract, not a gifted-property shortcut. Arizona HECM files stay at 62.