Quick Answer
All liens on the property must be paid off or validly subordinated before a HECM can close in first lien position — with reverse mortgage proceeds funding the payoffs at closing for most standard liens including first mortgages, HELOCs, and CalHFA loans.
- All liens must be paid off or subordinated before HECM closing.
- First mortgages and HELOCs are paid from reverse mortgage proceeds at closing.
- IRS tax liens have super-priority and must be addressed before closing.
- Mechanics' liens and HOA liens must be resolved — not just paid.
- CalHFA liens must be paid — CalHFA typically does not subordinate.
- The title search identifies all liens before the application is submitted.
Key Facts
| Topic | Key Fact |
|---|---|
| HECM lien position required | First — all other liens paid or subordinated |
| IRS tax lien priority | Super-priority — must be resolved, not just paid at closing in the normal sequence |
| Mechanics' liens | Must be formally resolved — not just paid |
| HOA liens | Must be current and paid — delinquent HOA liens must be resolved |
| CalHFA | Typically requires payoff — does not subordinate to new HECM |
| HELOC | Must be paid off and closed at HECM closing |
| Title search | Identifies all liens — conducted early in the process |
| Judgment liens | Recorded judgment liens must be paid or released |
Detailed Explanation
The HECM's first lien requirement is absolute — no other lien can have priority over the HECM when it closes. The title search, conducted early in the reverse mortgage process, identifies every recorded lien against the property. Each lien must be addressed before the HECM can close: paid off, released, or formally subordinated.
For standard liens — first mortgages and HELOCs — the process is straightforward: both are paid from the reverse mortgage proceeds at closing. The title company collects payoff statements from each lien holder, includes the payoff amounts in the closing statement, and disburses payments simultaneously with the HECM funding.
Judgment liens — recorded civil court judgments against the property owner — must be specifically addressed. Unlike a mortgage payoff where the lien holder releases automatically upon payment, a judgment lien requires a formal written release recorded with the county. The process of identifying, paying, and obtaining releases for all judgment liens can add 2 to 4 weeks to the closing timeline.
IRS tax liens are the most complex lien type. Federal tax liens — for unpaid federal taxes — have super-priority over mortgages and must be addressed separately from the closing. An IRS tax lien cannot simply be paid at closing; it requires specific release procedures through the IRS. Jay identifies IRS lien issues in the first consultation by asking about any outstanding federal tax obligations.
Jay Zayer, CRMP — 18 Years Experience
The lien checklist I run in every California consultation includes six specific questions: first mortgage (how much), HELOC (yes or no), CalHFA (yes or no), PACE or solar financing (yes or no), IRS or state tax obligations (yes or no), and HOA dues status (current). Those six questions identify 95% of the lien issues I encounter before the title search confirms them. The ones I miss in the initial consultation are usually discovered in the title search — and addressed from there.
Who This Is Right For
This may be a good fit if:
- You have multiple liens on your property and want to understand how the reverse mortgage handles each one
This may NOT be the right fit if:
- You have liens that cannot be paid from the reverse mortgage proceeds because they exceed the available principal limit — the HECM cannot close in this scenario
Common Misconception
Myth: Only the first mortgage needs to be paid off for a reverse mortgage.
Fact: All recorded liens against the property — including junior liens, judgment liens, HOA liens, and IRS liens — must be paid off or resolved before the HECM can close in first lien position.
Source: HUD HECM program guidelines
Authoritative Sources
- HUD: HECM lien position requirements — hud.gov
- CFPB: Mortgage title and lien issues — consumerfinance.gov
- IRS: Federal tax lien release procedures — irs.gov
People Also Ask
What liens must be paid off for a reverse mortgage?
All recorded liens — including first mortgages, HELOCs, CalHFA loans, PACE financing, judgment liens, HOA liens, and IRS tax liens. None can remain ahead of the HECM in priority.
How does the HECM handle an IRS tax lien?
IRS tax liens have super-priority and cannot simply be paid at closing. They require specific IRS release procedures. Contact Jay immediately if you have an outstanding IRS tax lien.
What if the lien payoffs consume all my reverse mortgage proceeds?
If the total lien payoffs equal or exceed the available principal limit, the HECM cannot produce any net proceeds. In this scenario, evaluate whether the payment elimination benefit alone justifies the transaction costs.