Violated Rider’s Owner Occupancy Clause

[Natalie Oliver]

I am wracking my brain trying to find the best solution here but I’m not able to find many resources on this.

I took out a mortgage in 2019 on a 4.25% FHA first time home buyers program where they credited me $3000 for my down payment. I only worked with the lender and the realtor- I knew starting out this would be a rental when I was ready to purchase a new home, and the lender assured me that it only needed to be owner occupied for 1 year, and 2 years in order to not repay the credit of $3000.

In January I purchased a second home and got an owner occupied loan on that residence. Payment on the rental is ~$670 and rent payment is $1225.

Just today I received a letter from the rental mortgage company saying I’ve violated the terms of my loan if I don’t return an affidavit stating it’s owner occupied by end of Sept.

I found my mortgage loan documents and a few times from the lender it says it must be owner occupied for 1 year. There is a page from the provider of the grant/credit (state housing authority) stating it must be owner occupied for the life of the loan or I have to pay it in full. They are referred to as a “rider” on the mortgage and it is an addendum document.

I had absolutely no idea that I was violating anything by doing this. I thought I had done my due diligence and have no idea how this didn’t come up when purchasing my current home. I am thinking I have to refinance/sell to avoid foreclosure. But they only gave me 30 days from the date of the letter 8/30 and I just got it today. I have about 1/3 of the mortgage amount in cash reserve.

I am planning to meet with a real estate lawyer and my local credit union (second mortgage not first) to see what is available after the weekend. Please advise.