AWACSMortgage compliance intelligence from Flightline

FHA · Mortgagee Letter ML 2025-09 · Published

Revisions to Residency Requirements

FHA eliminates eligibility for non-permanent resident borrowers across all Title II forward and HECM reverse mortgage programs. Mortgagees must determine borrower residency status, require evidence of lawful permanent residence or citizenship in Micronesia, the Marshall Islands, or Palau, and note lawful permanent residence on loan application documents.

Action requiredCase numbers assigned on or after May 25, 2025 · may adopt nowChecks passed· adjusted automaticallyRead the letter ↗ (opens in a new tab)

Loan impact

From the letter text · needs review

Applies to: All FHA Title II Single Family forward and Home Equity Conversion Mortgage (HECM) programs.

Applies when all of these are true
  • ANDFHA loan
  • ANDCase number date on or after May 25, 2025, or earlier if the seller adopts now
Addressed to
All FHA-Approved Mortgagees
Investor
FHAFrom the publisher, not quoted from the text
Programs
FHAFrom the publisher, not quoted from the text
Affected area
EligibilityGuide Section II.A.1.b.ii(A)(9)
Affected documents
URLA; RLARM
Effective
Case numbers assigned on or after May 25, 2025Sellers may implement immediately
Applicability confidence
Needs review: some rows could not be matched to a quote from the source
Supporting quotes from the letter
  • conditions“The provisions of this ML may be implemented immediately but must be implemented for FHA case numbers assigned on or after May 25, 2025.”
  • affected areas“This Mortgagee Letter (ML) updates the Borrower’s residency requirements to be eligible for FHA-insured financing.”
  • guide sections“This ML removes the Non-permanent Residents sections in its entirety, eliminating eligibility for non-permanent resident Borrowers, and updates the requirements for permanent residents in the following sections: • Residency Requirements (II.A.1.b.ii(A)(9)); • Residency Requirements (II.B.2.b.ii(A)(4)); • Non-credit Qualifying Exemptions (II.A.8.d.vi(C)(1)(a)); and • Special Documentation and Procedures for Non-credit Qualifying Streamline Refinances (II.A.8.d.vi(C)(5)(b)).”
  • affected documents“The mortgage file must include evidence of lawful permanent residence and indicate that the Borrower is a lawful permanent resident on the URLA.”
  • affected documents“The HECM file must include evidence of lawful permanent residence and indicate that the Borrower is a lawful permanent resident on the RLARM.”

What changed

From the letter text · Sections II.A.1.b.ii(A)(9), II.B.2.b.ii(A)(4), II.A.8.d.vi(C)(1)(a), II.A.8.d.vi(C)(5)(b)
RequirementPreviouslyNow
Forward mortgage borrower residency requirementsTightenedRequiredSection II.A.1.b.ii(A)(9)Previously: Mortgagees were required to document the lawful residency status of non-permanent resident borrowers to demonstrate long-term financial stability and eligibility.Mortgagees must determine borrower residency status, non-permanent residents are ineligible, and mortgage files for lawful permanent residents must include USCIS evidence and URLA indication. Borrowers who are citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau are also eligible, with evidence of that citizenship in the mortgage file.
HECM reverse mortgage borrower residency requirementsTightenedRequiredSection II.B.2.b.ii(A)(4)Previously: Mortgagees were required to document the lawful residency status of non-permanent resident borrowers to demonstrate long-term financial stability and eligibility.Mortgagees must determine borrower residency status for HECMs, non-permanent residents are ineligible, and HECM files must include USCIS evidence and RLARM indication. Borrowers who are citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau are also eligible, with evidence of that citizenship in the HECM file.
Non-credit qualifying streamline refinance exemptionsRemovedSection II.A.8.d.vi(C)(1)(a)Previously: Non-permanent resident provisions were included in the non-credit qualifying streamline refinance exemptions.Text regarding non-permanent residents was deleted from the non-credit qualifying streamline refinance exemptions section.
Applies when: All loan-impact conditions above · Purpose is streamline_refi, or earlier if the seller adopts now
Special documentation and procedures for non-credit qualifying streamline refinancesRemovedSection II.A.8.d.vi(C)(5)(b)Previously: Non-permanent resident documentation procedures were included for non-credit qualifying streamline refinances.Non-permanent resident text was deleted, and mortgagees may use an abbreviated URLA on non-credit qualifying streamline refinances without completing Sections 1b-1e, 2, 3, or 5, except 5a.A.
Applies when: All loan-impact conditions above · Purpose is streamline_refi, or earlier if the seller adopts now

What to do

AWACS interpretation · not source language

What to review: Review the updated residency eligibility rules that eliminate non-permanent resident eligibility and mandate lawful permanent residency determination and documentation on the URLA and RLARM for case numbers assigned on or after May 25, 2025.

Underwriting

Determine borrower residency status for all Title II forward and HECM loans with case numbers assigned on or after May 25, 2025, using documentation beyond a Social Security card: verify lawful permanent residence and note it on the URLA or RLARM, or, for a citizen of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau, keep evidence of that citizenship in the file; exclude non-permanent residents from eligibility.

Compliance

Update policy manuals and underwriting controls to enforce the ineligibility of non-permanent resident borrowers and implement required residency verification standards for case numbers assigned on or after May 25, 2025.

QC implications

  • Sample forward and HECM loan files with case numbers assigned on or after May 25, 2025, to confirm that non-permanent resident borrowers were excluded from financing, while lawful permanent residents and citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau (with evidence of that citizenship in the file) were treated as eligible.
  • Verify that loan files for lawful permanent residents contain acceptable evidence of permanent residency and correct designations on the URLA or RLARM.
  • Confirm that reviews of non-credit qualifying streamline refinances reflect that lenders may utilize an abbreviated URLA omitting Sections 1b through 1e, 2, 3, and 5, while requiring Section 5a.A to be completed.

Source and record

Version 2 · archived

Checks

  • Source verified: Passed

    The document ID, link and publication date match the official source.

  • Quotes match the source: Passed, adjusted automatically

    Every quoted passage appears word for word in the official document.

    • A detail the source does not support was removed or adjusted

  • Requirements backed by the source: Passed, adjusted automatically

    Anything marked required is backed by the requirement language and dates in the source.

    • A detail the source does not support was removed or adjusted
    • An independent check could not confirm which loans a change applies to; those conditions were removed

  • In scope: Passed

    The document is about residential mortgage lending.

  • Format and labels: Passed

    The record follows the AWACS format and uses its standard labels.

Version history

  1. Version 2 (current)
    Recorded
  2. Version 1
    Recorded