Florida Housing Finance Corporation (FHFC) has helped tens of thousands of Florida first-time buyers purchase homes through down payment and closing cost assistance programs. The most widely used is Florida Assist -- up to $10,000 as a 0%, non-amortizing deferred second mortgage with no monthly payments. Another program, FL HLP, provides up to $10,000 at 3% over 15 years with monthly payments.
These programs make homeownership possible for buyers who would otherwise struggle to cover a down payment. But they also create a second mortgage lien on your property -- one that comes due the moment you sell, refinance, or lose the home to foreclosure. If you are now facing foreclosure and your home was purchased with FHFC assistance, understanding how that second mortgage interacts with your options is critical.
How Florida Housing Down Payment Assistance Works
FHFC's programs are structured as second mortgage loans recorded on your property title. The key programs:
- Florida Assist -- Up to $10,000 (or up to $7,500 in some program versions), 0% interest, non-amortizing (no monthly payments). The entire balance becomes due and payable when you sell, refinance, transfer title, or move out of the property as your primary residence.
- FL HLP (Florida Homeownership Loan Program) -- Up to $10,000 at 3% interest, amortized over 15 years, with a monthly payment. Also becomes due in full at sale or transfer.
Both programs require the property to be your primary residence. Both are recorded as junior mortgage liens -- meaning the first mortgage lender has a superior claim on the property, and FHFC's lien is subordinate.
What Triggers Repayment of the FHFC Second Mortgage
The full balance of a Florida Assist or FL HLP loan becomes immediately due and payable upon any of the following:
- Sale or transfer of the property
- Refinancing of the first mortgage
- The property ceasing to be your primary residence
- Any event defined in the second mortgage as a default
Importantly, a foreclosure by your first mortgage lender triggers a transfer of title -- either through the foreclosure sale or a deed in lieu. This means the FHFC repayment trigger fires even though you did not voluntarily sell the property.
What Happens to the FHFC Lien During First Mortgage Foreclosure
In Florida's judicial foreclosure process, the first mortgage lender must name all junior lienholders -- including FHFC -- as defendants in the foreclosure complaint. FHFC receives notice and has the opportunity to protect its interest.
At the foreclosure sale, proceeds are distributed in lien priority order:
- Court costs and sale expenses
- First mortgage balance (principal, interest, fees)
- FHFC second mortgage balance
- Any remaining liens in order
- Surplus to the former owner under F.S. 45.032
For most homes that go to foreclosure after significant default, the first mortgage balance -- plus accrued interest, attorney fees, and foreclosure costs -- often equals or exceeds the sale price. When that happens, FHFC receives nothing from the sale proceeds, and its lien is extinguished by the foreclosure.
Whether FHFC then pursues a deficiency claim on the unpaid second mortgage balance depends on the program terms and FHFC's current policies. This is a question worth asking FHFC or its servicer directly.
Short Sale When You Have a FHFC Second Mortgage
A short sale with an FHFC second mortgage requires approval from two separate parties: your first mortgage servicer and FHFC. Both must agree to release their liens for less than the amounts owed.
The practical good news: FHFC participates in short sales and in many cases will agree to release its lien for a minimal amount -- sometimes as little as $0 to a few hundred dollars -- when the first mortgage is also approving a short sale and there are insufficient proceeds to pay the second mortgage. Coordinate both approvals simultaneously. Getting the first lender's approval without FHFC's lien release agreement creates a title problem that will block the sale from closing.
A deed in lieu of foreclosure with an FHFC second mortgage in place also requires FHFC's cooperation. FHFC would need to subordinate or release its lien as part of the deed in lieu transaction.
Loan Modification and FHFC Second Mortgages
If you are behind on your first mortgage, a loan modificationis often the best path to staying in your home. The good news: loan modifications on first mortgages generally do not require FHFC's approval.
For Florida Assist borrowers, the second mortgage has no monthly payment, so modifying the first mortgage does not affect what you owe FHFC or when it is due. The modification helps you stay current on the first mortgage and remain in the home -- which delays the FHFC repayment trigger indefinitely.
For FL HLP borrowers (who have a monthly payment on the second), contact FHFC's servicer separately if the 3% monthly payment is also causing hardship. FL HLP modifications may be available in cases of documented hardship.
Forbearance While You Stabilize
If you need temporary payment relief, a forbearance plan on your first mortgage can pause payments while you recover financially. CFPB Regulation X requires servicers of federally related mortgage loans to review any complete loss mitigation application -- including forbearance requests.
During a forbearance, you remain in the home and continue to meet the primary residence requirement for Florida Assist. The FHFC repayment trigger is not activated by a forbearance alone.
Practical Steps If You Are Behind With a FHFC Second
- Focus on the first mortgage first -- The Florida Assist loan requires no monthly payment, so your cash shortage is driven by the first mortgage. Contact your first mortgage servicer and submit a complete loss mitigation application immediately. Include a hardship letter documenting the financial circumstances.
- Get free HUD-approved counseling -- A HUD-approved housing counselor can help you communicate with both the first mortgage servicer and FHFC at no cost. They understand how layered assistance programs interact with foreclosure options.
- If selling is necessary-- Contact FHFC's servicer early to obtain a payoff figure. If you have equity sufficient to pay both loans, a traditional sale pays them both off at closing. If not, request FHFC's short sale participation guidelines and pursue both approvals simultaneously.
- Respond to the foreclosure complaint -- If a foreclosure lawsuit has been filed, respond within 20 days of being served. See our guide to answering a foreclosure complaint. Filing a response preserves your options and gives you time to negotiate.
Free Guidance for Florida Homeowners With FHFC Loans
Navigating a first mortgage foreclosure when you also have a Florida Housing second mortgage requires understanding the interaction between two separate liens, two separate servicers, and the program terms that govern FHFC's participation in any resolution. This is a situation where early action and good guidance make a significant difference in outcomes.
Barrett Henry, a Broker Associate at REMAX Collective with 23+ years of Florida real estate experience, provides free guidance to homeowners across all 67 Florida counties. Start a confidential conversation at our Get Help page.
Additional resources:
- Free HUD-approved housing counseling -- counselors experienced with layered financing and loss mitigation
- Florida hardship letter template -- document your hardship for your first mortgage servicer
- CFPB loss mitigation waterfall -- the priority order for loss mitigation options under federal rules
- Florida foreclosure checklist -- step-by-step action guide for homeowners in default
- Florida deficiency judgments -- what to know about deficiency exposure on both mortgages after foreclosure
