<<Back

Forward>>

Close

Secondary Financing
Background

Secondary Financing is used to enter information on funds directly provided to the borrower in order to meet the required minimum cash investment. This information must be entered before processing Insurance Application for a forward mortgage case. Secondary financing is defined as any financing other than the first mortgage that creates a lien against the property. It is not considered a gift even if there are no monthly repayment provisions (soft or silent secondary financing) or other provisions that forgive the debt.

Acceptable sources of funds include the following:

• Nonprofit (Not Instrumentality of Government): Nonprofit agency on HUD's Nonprofits Roster that is not an instrumentality of government
  
  
• Private Organizations/Eligible Individuals
  
  
• Lender: HUD/FHA-approved lender
  
  
• Section 115 Entities: Nonprofit instrumentality of government whose income is excluded from Federal taxation under section 115 of the Internal Revenue Code of 1986 (Note: For the secondary financing program, a Section a 115 Entity is treated as an instrumentality of government.)
  
  
• FHLB: Federal Home Loan Bank (FHLB) member and HUD/FHA-approved lender (Note: The FHLB Set-Aside Grant Program is not considered secondary financing.)
  
  
• Government - State and Local
  
  
• Federal Government - GNND: HUD Good Neighbor Next Door Program
  
  
• Nonprofit Instrumentality of Government: Government agency or instrumentality of government that is also a nonprofit agency and on HUD's Nonprofits Roster
  
  
• Family / Relative

Sources of information for Secondary Financing include Form HUD-92900-LT, Secondary Financing and secondary financing loan instruments.

HUD Requirements for Nonprofit Agencies

The following requirements must be met if (a) the source of funds is Nonprofit (Not an Instrumentality of Government) or Nonprofit Instrumentality of Government, or (b) the secondary financing loan closing is in the name of a nonprofit:

• Must have an active status on HUD's Nonprofits Roster
  
  
• Must be approved in the state in which the property is located
  
  
• Must have Full or Limited authorization for Secondary Financing
  
  
• Secondary Financing authorization expiration date must not be earlier than the case number assignment date 

FHA Connection authorization for Insurance Application is required to use Secondary Financing.

You can access Secondary Financing using the following sequence of FHA Connection links from the main menu: Single Family FHA, Single Family Origination, Case Processing, and Secondary Financing (or through a link via Insurance Application).

Return to top

See Also

Secondary Financing - Steps for Processing

Secondary Financing Page - Field Descriptions

Secondary Financing Update Page - Field Descriptions

Secondary Financing Results Page - Field Descriptions

Return to top