Barrett Henry is a Broker Associate at REMAX Collective with 23+ years of Florida real estate experience. He works with homeowners across all 67 Florida counties, including many who purchased their homes with SHIP or HOME down payment assistance and now face foreclosure with questions about what happens to the subordinate lien and any recapture obligation.
Many Florida homeowners who purchased with county or municipal housing assistance do not realize their property carries a second mortgage and deed restriction until they try to sell, refinance, or face foreclosure. This guide explains how SHIP and HOME program restrictions work, what happens when the first mortgage lender forecloses, and the options available to you.
For a full understanding of the Florida foreclosure process and how subordinate liens are handled, see our Florida foreclosure process guide.
SHIP Program: Florida's Primary Affordable Housing Assistance
The State Housing Initiatives Partnership (SHIP) program was established under F.S. §420.907-9079. Florida distributes SHIP funds to all 67 counties, which in turn provide down payment assistance, closing cost assistance, and rehabilitation loans to income-qualifying homebuyers and homeowners.
SHIP assistance typically comes as a subordinate (second or third) mortgage with the following characteristics:
- Deferred payment: No monthly payments required; the loan is typically due only upon sale, refinance, transfer, or if the owner stops occupying the property as their primary residence.
- Affordability period: A restriction period of 5 to 20 years during which recapture provisions apply. Once the restriction period expires, the lien typically disappears or the recapture obligation ends.
- Owner-occupancy requirement: The homeowner must occupy the property as their primary residence. Renting the property or leaving it vacant for extended periods can trigger the recapture provision.
- Recapture on resale: If you sell during the restriction period, some or all of the assistance must be repaid. The amount decreases over time as the restriction period progresses.
Every county administers its SHIP program differently. Some offer forgivable loans that require zero repayment if you stay in the home for the full restriction period. Others use shared equity models or sliding-scale recapture. Read your specific assistance agreement carefully.
HUD HOME Program: Federal Affordable Housing Assistance
The HOME Investment Partnerships Program is a federal program administered by HUD under 24 C.F.R. Part 92. HOME funds flow to Florida counties, cities, and community development agencies, which use them for homebuyer assistance similar to SHIP.
HOME program deed restrictions are governed by both the federal regulations and the local participating jurisdiction's written agreements. The federal HOME rules require an affordability period that varies by the amount of assistance:
- 5 years for HOME assistance under $15,000
- 10 years for HOME assistance between $15,000 and $40,000
- 15 years for HOME assistance over $40,000
During the affordability period, the HOME regulations require either resale or recapture restrictions. If your county chose recapture, you may owe a portion of the HOME assistance back if you sell, transfer, or face foreclosure before the period ends.
What Happens When the First Mortgage Lender Forecloses
Lien priority in Florida is determined by the order in which instruments are recorded in the county's official records -- the first-in-time rule. A SHIP or HOME subordinate mortgage recorded after the first mortgage is in a junior position.
When the first mortgage lender files a foreclosure lawsuit under F.S. §702.015, they typically name all junior lienholders -- including the county's SHIP or HOME lender -- as defendants. The foreclosure proceeding determines the priority and disposition of all liens against the property.
At the foreclosure auction, the sale proceeds are distributed in lien priority order:
- Court costs and fees
- First mortgage payoff (principal, interest, and costs through judgment)
- Junior liens in recorded order (SHIP/HOME, HOA assessments, etc.)
- Any surplus to the former homeowner
In most Florida foreclosure cases involving SHIP or HOME assistance, the sale price does not cover the first mortgage payoff, leaving nothing for junior lienholders. When a junior lienholder receives nothing from the sale, their lien is extinguished -- the security interest against the property is wiped out by the foreclosure. The new owner takes title free of the SHIP or HOME restriction.
Does the Recapture Obligation Survive Foreclosure?
This is the critical question most homeowners do not know to ask. The extinguishment of the lien (the security interest against the property) does not automatically extinguish the underlying personal debt obligation if any exists.
Review your SHIP or HOME assistance agreement for language about what happens in a foreclosure scenario. Specifically look for:
- Language stating that foreclosure by a superior lienholder constitutes a “permitted transfer” or “involuntary disposition” that forgives or waives recapture.
- Language stating that the assistance is a forgivable loan contingent only on the restriction period expiring -- in which case foreclosure may accelerate the due date without creating an ongoing personal debt.
- Language that a recapture amount is only collectible from sale proceeds -- which would mean if there are no sale proceeds above the first mortgage, there is nothing to collect.
Florida counties vary significantly in their approaches. Some county housing offices will write off the obligation after a foreclosure in which no proceeds were available. Others may attempt to collect the recapture amount as an unsecured personal debt. Contact the county housing office directly -- ideally with the help of a housing counselor -- before the foreclosure sale is completed.
Your Options Before Foreclosure Is Complete
Acting before the first mortgage foreclosure is completed preserves the most options:
- Loan modification: Modifying the first mortgage does not trigger SHIP recapture. A successful modification removes the foreclosure threat and keeps the SHIP/HOME restriction intact -- no recapture event occurs. Apply through your first mortgage servicer and obtain free help from a HUD-approved counselor.
- Pre-foreclosure sale with equity: If proceeds cover both the first mortgage and the SHIP/HOME lien (at whatever recapture amount applies), you can sell and resolve everything. A short sale requires approval from both the first mortgage servicer and the SHIP/HOME subordinate lienholder.
- Contact the SHIP/HOME administering office: Many county housing offices will work with homeowners facing foreclosure. They may agree to subordinate their lien to allow a refinance, waive recapture in hardship situations, or clarify whether the recapture obligation will be released if foreclosure proceeds.
- Bankruptcy: A subordinate SHIP or HOME mortgage may be eligible for lien stripping in a Chapter 13 bankruptcy if the property is worth less than the first mortgage balance -- meaning the subordinate lien is entirely underwater. This is a complex area; consult a bankruptcy attorney.
See our full guide on how to stop foreclosure in Florida and use our foreclosure checklist to track every deadline.
Finding Your County's SHIP/HOME Program Contact
Every Florida county administers its own SHIP program. The Florida Housing Finance Corporation maintains a directory of local SHIP program administrators. You can also search your county government website for the “community development” or “housing” department. If you used a nonprofit organization for your original homebuyer assistance, they may also be able to help you identify the current program administrator.
A HUD-approved housing counselor familiar with your county's SHIP/HOME program can help you navigate both the first mortgage servicer process and the subordinate lien questions at the same time. HUD counseling is free.
Related Guides
- Florida Foreclosure Process Overview
- HOA Foreclosure in Florida
- Loan Modification in Florida
- Florida Short Sale Guide
- Florida Deficiency Judgments
- Bankruptcy and Foreclosure in Florida
- 1099-C Tax Consequences of Florida Foreclosure
Facing foreclosure with a SHIP or HOME lien? Get free help today -- no cost, no obligation. We connect Florida homeowners with HUD-approved counselors and foreclosure professionals in all 67 Florida counties.
