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Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that can not be refinanced into the FHA insured mortgage; or (2) either the FHA approved lender making the new mortgage or the existing note holder may take back a second
lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.