A recorded IRS tax lien does not automatically deny reverse mortgage eligibility. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. A Home Equity Conversion Mortgage can still close when the Notice of Federal Tax Lien is paid or released so the new deed of trust can sit in first position. Title will find the NFTL. Hiding it does not work.
Suppose a borrower named Delia, 73, occupies a Sacramento house, has a recorded IRS tax lien, and wants the conventional payment gone. That is a title-and-payoff file. It is not the installment-agreement file with a clean grant-deed chain. The sibling IRS payment plan page splits those two facts. This page is the recorded lien.
A HECM is FHA-insured. It is not an IRS settlement program and it is not a government benefit.
Does a recorded Notice of Federal Tax Lien automatically deny a HECM?
No. Part 206 does not print “IRS lien equals lifetime reject.” 24 CFR 206.35 and 24 CFR 206.45 still require insurable title for a first-lien HECM. A recorded NFTL is a prior charge. The usual curative path is a written IRS payoff paid at closing, then a recorded release.
Age is still 62 under 24 CFR 206.33. Occupancy is still 24 CFR 206.39. Counseling is still 24 CFR 206.41. A federal tax lien does not waive those tests. It adds a demand the closer has to honor.
Model leftover cash after the IRS demand before you treat “yes, with a tax lien” as a large check. After an IRS demand, leftover capacity still lands in the mid-30s to low-50s percent of appraised value, depending on age and expected rate. I will not quote a live cell.
Paying the NFTL does not shrink initial MIP of 2.00% of maximum claim amount under Mortgagee Letter 2017-12. The 2026 cap remains $1,249,125 (Mortgagee Letter 2025-22). Origination remains capped at $6,000 under 24 CFR 206.31. After closing, annual MIP still accrues at 0.50% of outstanding balance. An adjustable HECM still uses 1-month CMT plus lender margin.
How does a NFTL payoff interact with 24 CFR 206.36 seasoning?
Paying a recorded IRS tax lien at closing is normal when title requires it. On an NFTL, 24 CFR 206.36 then asks whether that federal lien may be paid from HECM proceeds. The Commissioner may set a seasoning period. The rule shall not prohibit the payoff from proceeds if the lien has been in place more than twelve months, or if cash to the borrower is $500 or less.
A Notice of Federal Tax Lien recorded last month so you could “clean it up with the reverse” is the file 206.36 is built to catch if you also want a large leftover draw. Paying the IRS from other funds, waiting until the NFTL is older than twelve months, or using a $500-or-less cash structure are the statutory forks. A slogan is not.
I work with multiple lenders. Their overlays on IRS liens are not identical. Confirm the live overlay with the underwriter before anyone orders an appraisal. I will not invent a dollar cutoff.
What papers does the IRS have to issue before title will insure first position?
A written payoff or a recorded release, not a phone call. Closers pay from a demand. A verbal “the agent said it is fine” is not a title-curative document. Put the NFTL printout, the IRS demand, and any installment history in the folder in week one.
A LESA, if residual income requires one after the IRS draft is counted, is still origination-only. It does not pay the IRS. It holds future property taxes and insurance.
Counseling still costs $125–$175. The certificate lasts 180 days. California Civil Code 1923.2(k) still inserts seven days after counseling. Do not spend that clock while the IRS has not issued a demand.
See paying property taxes if the live problem is a county default. See the financial assessment if the live problem is leftover budget after the IRS draft.
A second geography: a 69-year-old in Mesa with the same NFTL. Arizona recorders stamp the same federal lien California recorders stamp. First-lien HECM logic does not change at the state line.
NFTL files that are complete still average about 30 days to fund in Jay’s pipeline. That is not a guarantee. A stale IRS letter is how 30 days becomes a new counseling date.
Who should not confuse a NFTL with a county property-tax default?
Do not mix them. A county default is a property-charge history event that can force a LESA or a deny under Mortgagee Letters 2014-21 and 2014-22. An IRS tax lien is a federal recorded charge against the house. Paying last year’s county installment does not release the NFTL.
This path does not help a household that wants me to originate behind an uncleared IRS lien. I will not. It does not help a file whose IRS demand plus first-mortgage payoff already exceed the principal limit.
What can go wrong: counseling is completed, then the IRS issues a larger demand than the dinner-table number. Or the family treats an installment agreement with no recorded lien as if it were this page. Or someone disputes the NFTL the week of signing and title cannot insure.
If heirs later keep an IRS-lien HECM house, they still repay the outstanding balance under 24 CFR 206.125(a)(2)(i). An IRS release at origination does not rewrite that heir subsection.
I will originate when the NFTL can actually be retired at closing. I will turn away a federal-lien slogan that still has no written demand.