Reverse Mortgage and Behind on Property Taxes or Insurance: What Happens Next

Yes, a reverse mortgage can come due even though there is no monthly payment: if property taxes, homeowners insurance, or association fees go unpaid, federal rules let the loan be called due and payable with HUD’s approval. On an FHA-insured reverse mortgage, known as a HECM, those property charges are the borrower’s responsibility (24 CFR 206.205), and failing to pay them is a listed default (24 CFR 206.27(c)(2)(iii)). The good news is that the same rules give you defined choices, including correcting the problem and keeping the home.

In Florida, where insurance and tax bills have risen sharply, this is one of the most common ways a reverse mortgage reaches trouble.

What does a reverse mortgage borrower still have to pay?

HUD’s rule divides property charges into two groups (24 CFR 206.205):

• You pay directly, on time: ground rents, condominium fees, planned unit development fees, and homeowners’ association fees.
• Paid through a set-aside, by you, or by the lender, depending on your loan: property taxes including special assessments, hazard insurance premiums, and any applicable flood insurance.

The mortgage also requires you to keep the property in good repair and insured against the hazards the lender requires (24 CFR 206.27).

If your loan has a Life Expectancy Set-Aside (LESA), money was held back at closing to pay taxes and insurance for you. The lender decides whether one is required based on a financial assessment (24 CFR 206.205(b)). Check your loan statement: if there is no set-aside, the bills are yours.

When can the loan be called due?

The HECM mortgage must state that the balance becomes due and payable, with HUD’s approval, if the home stops being a borrower’s principal residence, if a borrower is away more than 12 consecutive months because of illness, if property charges are not paid as required, or if another obligation under the mortgage is not met (24 CFR 206.27(c)(2)). Death of the last surviving borrower is a separate trigger, with a deferral available for an eligible non-borrowing spouse. A surviving spouse who was not a borrower has separate deferral rules, covered on my spouse died and the mortgage was in their name.

What choices do you get?

After notifying HUD and receiving approval where needed, the servicer must notify the borrower and give 30 days from the notice to do one of these (24 CFR 206.125(a)(2)):

1. Pay the loan balance in full.
2. Sell the home for at least the amount HUD sets by notice, which cannot exceed 95 percent of the home’s value as determined under HUD’s procedure, with the net proceeds applied to the balance. Closing costs are capped at the greater of 11 percent of the price or a fixed amount HUD publishes.
3. Give a deed in lieu of foreclosure.
4. Correct the condition that made the loan due, such as paying the overdue taxes or reinstating insurance.

A 30-day notice is short. Read it the day it arrives, and call a HUD-approved counselor that week.

Can you catch up and keep the home?

Often, yes. Even after a foreclosure has begun, the servicer must let a borrower correct the condition and reinstate the mortgage, adding the servicer’s costs, including foreclosure costs and reasonable attorney fees, to the loan balance. The servicer may refuse if it already accepted a reinstatement within the previous two years, if reinstatement would prevent a later foreclosure, or if it would hurt the lien’s priority (24 CFR 206.125(a)(3)).

Ways people fund the cure: family help, a repayment arrangement where the servicer offers one, local property tax assistance, or replacing a lapsed insurance policy with your own coverage. If the lender bought insurance for you, read force-placed insurance. If the tax bill is the problem, property taxes went up in Florida covers homestead and the Save Our Homes cap.

Can the lender come after you for more?

No. A HECM borrower has no personal liability for the balance. The lender may enforce the debt only through sale of the property and may not obtain a deficiency judgment if the mortgage is foreclosed (24 CFR 206.27(b)(8)). This is a major difference from a regular mortgage, where Florida permits deficiency claims.

When is selling the better answer?

If the property charges will keep outrunning your income, reinstating once only buys time. A sale on your own schedule, within the rule’s price floor, is usually better than a foreclosure, and any equity above the balance is yours or your estate’s. Families handling a loan after a parent’s death should also read inherited house behind on payments.

What should you do this week?

1. Find your most recent reverse mortgage statement and check whether you have a set-aside.
2. Confirm the insurance policy is active and the property tax bill is paid or on a plan.
3. If you received a due-and-payable notice, note the 30-day date on your calendar.
4. Call a free HUD-approved housing counselor; many specialize in reverse mortgages.
5. If selling may be the answer, use the short sale qualification checker to see what a sale would require. Nothing is saved.

Short Sale Guide is a licensed Florida real estate brokerage. This page describes HUD’s HECM regulations in general terms and is not legal, tax, or financial advice; your loan documents and your servicer’s written notices control. For the real-estate side, use the file checker or call 855-725-3898.