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Seeking to align with recent executive orders issued by President Donald Trump, the Federal Housing Administration (FHA) announced on Wednesday the publication of a new mortgagee letter (ML) that restricts qualification for FHA-backed mortgages to U.S. citizens or permanent residents.
The measure applies to all Title II single-family mortgage programs, including the Home Equity Conversion Mortgage (HECM) program.
Alongside the ML, FHA also published a Title I Letter that applies to property improvement and manufactured home loan programs. The guidance can be implemented immediately but must be in place for all case numbers issued on or after May 25.
The HECM program already had certain restrictions in place related to U.S. citizens or permanent residents.
According to HECM program guidance found in the Single Family 4000.1 Handbook, determining the residency status of a borrower is the responsibility of the lender “based on information provided on the mortgage application and other applicable documentation.” A Social Security card is not sufficient proof of such status.
Permanent residents are eligible for FHA financing “provided the borrower satisfies the same requirements, terms, and conditions as those for U.S. citizens.” Additionally, the HECM file must include evidence of citizenship or permanent residency status on the Residential Loan Application for Reverse Mortgages (RLARM).
But the HECM section of the handbook also specified in a prior revision that a “borrower who is a non-permanent resident may be eligible for FHA-insured financing” under a dedicated section for “non-permanent residents.” The requirements were more deeply enumerated and included separate subsections for work eligibility.
In the latest revision that will be incorporated into the handbook at a later date, the “non-permanent resident” section appears to have been changed and truncated to only include “citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau.”
These areas encompass the Compacts of Free Association, which gives them access to many U.S. domestic programs. Each of them uses the U.S. dollar as their primary currency.
Other elements of the section — including for holders of H1-B visas, or people in the U.S. that are designated as refugees or asylum seekers — appear to have been removed, according to documents reviewed by HousingWire’s Reverse Mortgage Daily (RMD).
Ascertaining the practical impact these changes will have on the HECM program is a challenge.
As FHA notes in the new guidance, the agency “does not retain citizenship or residency data from the loan application and therefore does not maintain information on the number of non-permanent residents who have received FHA-insured loans under past policies.”
Originators who spoke with RMD do not frequently run into situations with potential non-citizen borrowers. Christina Harmes Hika with Amerifund Home Loans said she has come close on a couple of occasions to originating for such a borrower, but it never reached completion.
“I’ve come close,” she said. “The language and cultural barriers are challenging, and sometimes the translation process can fall through and they choose not to go forward.”
One borrower she is currently serving gained U.S. citizenship very recently. The situation could have quickly become more complicated if that did not happen, Harmes Hika said.
Steve Irwin, the president of the National Reverse Mortgage Lenders Association (NRMLA), said the association will undertake a full review of the new requirements.
“As with any new policy guidance issued by HUD, NRMLA’s HUD Issues Committee and its Risk and Compliance Committee will carefully review any changes to current policy that might be detailed in Mortgagee Letter 2025-09, and if there are any pressing implementation questions, these NRMLA committees will craft a comment letter into the department seeking clarification,” Irwin said.
Jackie Boies, senior director of counseling and support at Money Management International (MMI), said that her organization continues to provide counseling to all who seek it.
“Our understanding of the mortgagee letter is that the burden of proof of residency falls on the lender, and it applies to all FHA-backed loans, which includes HECM,” she said. “At MMI, we provide counseling to all consumers who seek it. Setting aside qualifying for a particular loan or program, all consumers benefit from counseling and completing a full financial review.”
Counseling helps to provide anyone seeking a loan with “information, a working budget, valuable referrals and resources, and an understanding of their options,” she added while noting that “the client is better equipped to move forward with their housing decisions.”
