Lien Release or Subordination

Competitive Affordable Housing Program (AHP) and Down Payment Product (DPP) grants for owner-occupied units are subject to a 5-year retention period, requiring a lien through an FHLB Des Moines (the Bank) approved Retention Agreement.  

Subsidy awards used for purchase, purchase in conjunction with construction, or purchase in conjunction with rehabilitation of an owner-occupied unit are subject to a Retention Agreement. Retention is secured by a Deed Restriction. The form used by the FHLB Seattle prior to its merger with the Bank is a Deed of Trust or Mortgage.  Responsibility for servicing the Retention Agreement lies with: 

• A Deed Restriction will be serviced by the “Lender” named in the document, typically a member financial institution or a sponsor organization delegated by the member.  
• A Deed of Trust or Mortgage will be serviced by the Bank as successor to the FHLB Seattle, which is typically named as “Beneficiary”. 

Please see the following instructions for lien releases, repayment, or subordination of liens. If you have any questions or require assistance after review of instructions, please contact the Community Investment Department at 800.544.3452, ext.2400.

Instructions for Lien Releases, Repayment, Forgiveness or Subordination

• Release of Expired Lien

  If it is more than five years past the date of the Retention Agreement it may be released.  To release a lien once the retention period has ended, work with the Lender or with the Beneficiary named on the Retention Agreement.  For forms which show a Beneficiary, please work with our Community Investment Department by sending a copy of the recorded Retention Agreement and forms for release to communityinvestment@fhlbdm.com, or call Community Investment at 800.544.3452, ext. 2400 for assistance. 

• Release of an Owner-Occupied Rehabilitation Lien

  If the subsidy award was used for rehabilitation of an owner-occupied unit without a purchase, the Retention Agreement is forgiven and may be released. Beginning 1/1/2020, an existing Deed Restriction or Deed of Trust or Mortgage on an owner-occupied rehabilitation unit is no longer subject to retention and may be released prior to the five-year retention period stated on the lien. To release a lien, work with the Lender or with the Beneficiary named on the Retention Agreement. For forms which show a Beneficiary, please work with our Community Investment Department by sending a copy of the recorded Retention Agreement and forms for release to communityinvestment@fhlbdm.com, or call Community Investment at 800.544.3452, ext. 2400 for assistance. 

• Repayment Calculation Form/Household's Investment Credits

  In the event of a sale, transfer, or assignment of title or deed of the assisted unit or a refinance where there is no subordination prior to the expiration of the Retention Agreement, it may be necessary to repay to FHLB Des Moines (the Bank) the unforgiven portion of the lien from any net proceeds upon sale, transfer, assignment of title or deed, or refinance. 

  Exceptions include: 

  The unit is sold, transferred or assigned to another low-or-moderate income household as determined by proxy or by income; 

  The remaining pro rata subsidy amount is $2,500 or less; or

  The net proceeds from the sale are $2,500 or less.

  If an exception applies, the Bank’s lien may be released without repayment. 

  Household's investment, including any capital improvements made by the owner, will reduce net proceeds and may allow for total grant forgiveness.

  Use the “Repayment Calculation Form” to calculate the amount of repayment due. Repayment Calculation Forms must be approved by the Bank prior to closing. All forgiveness and repayment amounts must also be approved by the Bank prior to remitting repayment to the Bank.

  Please allow up to five business days for an initial response to a forgiveness or repayment request.

  Repayment Calculation Form

  Instructions for Repayment Calculator

• Request for Forgiveness - Sale to Another Low-or-Moderate Income Household

  In the event of a sale, transfer, or assignment of a title or deed of the assisted unit during the term of the lien, the borrower may be required to repay the unforgiven portion of the lien from any net proceeds, unless the unit is sold or transferred to another low-or-moderate income household. Subsequent purchaser income may be determined by proxy or by actual income.  

  By proxy -  It assumed that the property has been sold to a subsequent household whose income is at or below 80% area median income if the sales price of the property is less than or equal to the HUD Home Value Limit  (value limit).  To determine whether the sale, transfer or assignment qualifies for forgiveness due to proxy, complete the Repayment Calculator  or the “Request for Forgiveness – Sale to Another Low-or Moderate Income Household” form below.  

  By income - Value limits proxy may not be used if the Bank or its designee has documentation demonstrating the subsequent purchaser’s actual income.  

  If actual income is available, use the linked form, “Request for Forgiveness  – Sale to Another Low-or Moderate Income Household By Income,” to determine if repayment is required. Instructions for release of lien in the event of forgiveness at sale are included in the form. If there is no forgiveness, use the “Repayment Calculation Form” to calculate and remit repayment to the Bank.

  Please allow up to five business days for an initial response to a forgiveness or repayment request.

  Request for Forgiveness of Repayment

• Notice of Foreclosure or Death of Borrower

  In the event of a foreclosure, deed in lieu of foreclosure, or assignment of an FHA insured first mortgage to the Secretary of HUD, the Retention Agreement is terminated and may be released. In the event of the death of the owner(s) of the unit subject to lien, the Retention Agreement is terminated and may be released. 

  Use the form “Notice of Foreclosure or Death of Borrower” to provide FHLB Des Moines (the Bank) notice of a foreclosure or death of the borrower. Instructions for release of lien in the event of death of the borrower are included in the form.     

  Notice of Foreclosure or Death of Borrower
   

• Subordination of Lien (at Refinance)

  In the event of a refinance of the AHP/DP assisted unit during the term of the lien, the borrower may be required to repay the unforgiven portion of the lien from any net proceeds at refinance, unless the unit continues to be subject to the FHLB Des Moines (the Bank’s) lien by means of a Subordination Agreement. Lenders named in a Deed Restriction may use the form “Subordination Agreement” to subordinate the lien

  Subordination Agreement