Mandatory Obligations
Costs and payoffs that must be paid at HECM closing from loan proceeds, including existing liens and certain fees.
Mandatory obligations are the costs that must be paid at or before HECM closing, generally out of the loan proceeds. They include payoff of any existing mortgage or qualifying lien on the property, closing costs such as origination fees and title charges, the initial mortgage insurance premium, and certain other amounts required by program rules.
Mandatory obligations matter because they affect how much of the principal limit is available as immediate cash or as a line of credit at closing. They also help determine the first-year disbursement limit for some HECM products under FHA rules.
Understanding mandatory obligations is part of comparing HECM products honestly. A higher home value or principal limit does not automatically translate into more cash at closing if existing liens and costs absorb most of the proceeds.
Related terms
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