HUD has released Mortgagee Letter 2006-29 titled, Louisiana Road Home Program. This mortgagee letter provides guidance regarding grant program issues specific to FHA-insured loans.

Under the Program, eligible homeowners may receive a one-time grant payment, up to a maximum of $150,000, for home damages not covered by property insurance, FEMA grants or other Federal, state or local government programs.  In exchange for the grant payment, a qualifying homeowner must agree to the following covenants and restrictions running with and encumbering the damaged property;

• Flood insurance is to be maintained if the property is located in a Special Flood Hazard Area under FEMA Flood Maps
• Rebuilding and repairs must be in accordance with applicable housing codes and ordinances
• Building elevation must be in accordance with FEMA recommended flood elevations and;
• homeowner maintains occupancy for three years.

Existing lienholders must subordinate their liens to the state required covenants for the homeowner to be eligible for the Grant award.  However, the declaration of covenants generally provides that the covenants shall not be enforced against the mortgagee, FHA, or any subsequent purchaser except to the extent that the subsequent purchaser breaches the covenants. 

With this Mortgagee Letter HUD announces that it has no objection to the subordination of FHA-insured first mortgage liens to the covenants required by the state as a condition for grant awards, and covenant-encumbered title that is otherwise good and marketable will be acceptable to HUD upon claim.

HUD may hold a lien on some eligible properties as security for a partial claim, section 235 subsidy mortgage, HECM mortgage, an assigned FHA mortgage or a property sale under HUD’s Good Neighbor Next Door sales program.  Requests to subordinate such liens to the State required covenants should be submitted to HUD’s servicing contractor at the following address:

Questions regarding this Mortgagee Letter may be directed to HUD's National Servicing Center (NSC) at (888) 297-8685 or hsg-lossmit@hud.gov

To view the Mortgagee Letter in its entirety, please click here.