Can You Lose Your Home With A Reverse Mortgage
Yes, if the loan becomes due and is not resolved. With HUD’s approval, a HECM can be called due if no borrower lives in the home, property taxes or insurance go unpaid, or the home is not kept in repair. Here is what causes that, what notices come first, and what you must keep doing.
Quick answer
Yes, if the loan’s terms are not met. A HECM becomes due when the last surviving borrower dies, sells or permanently moves away, or when the borrower does not pay property taxes and insurance on time or does not keep the home maintained and repaired. It can also become due if a borrower is away for more than 12 consecutive months because of illness and no other borrower lives there. Before the loan is called due for an unmet obligation, HUD must approve it and the lender must notify you of the specific obligation.
What can make the loan due
Each item below is an FHA rule for the HECM while a borrower is living. Most require HUD’s approval before the loan is called due.
- No borrower lives there. The home must be the principal residence of each borrower, and a borrower may have only one principal residence at a time. If no borrower keeps the home as a principal residence, HUD may approve calling the loan due.
- A long absence for illness. If a borrower is away from the home for more than 12 consecutive months because of physical or mental illness, and the home is not the principal residence of at least one other borrower, HUD may approve calling the loan due.
- Unpaid property charges. Property taxes, hazard insurance, flood insurance if it applies, ground rents, HOA and condo fees, PUD fees and special assessments are your obligations. Leaving them unpaid can lead HUD to approve calling the loan due.
- A home not kept in repair. If the servicer learns the home’s condition has deteriorated, it must notify you and give you 60 days to begin repairs. If repairs do not start in time or do not make satisfactory progress, the servicer must follow the due and payable rules.
- Any other unmet obligation. HUD may approve calling the loan due when any obligation of the borrower under the HECM is not fulfilled. The servicer must support its request with original documents, such as proof from a taxing authority that taxes are delinquent or an insurance termination letter.
- Giving up all title. If a borrower conveys all of their title in the home and no other borrower keeps title, the loan becomes due automatically. Unlike the items above, this does not wait for HUD’s approval.
Live there as your residence
Watch long illness absences
Pay property charges on time
Keep the home in repair
Meet every loan obligation
Keep title to the home
How Property Charge Defaults Work
A missed tax or insurance bill follows a set path under FHA’s HECM rules, with written notices and time limits before the loan is called due.
The servicer may pay a missed property charge from loan funds that are still available. If not enough funds remain, it must promptly tell you that not paying within 30 days of the due date will make the loan due and payable. Within 30 days of learning a charge is unpaid, the servicer must send a Property Charge Delinquency letter. The letter states what was not paid and that failing to pay within 30 days of the notice will make the loan due and payable.
The letter must also give notice of housing counseling and information on loss mitigation options. These include refinancing into a new HECM if you qualify, government assistance programs at the state, local or other level, and selling the home or giving a deed in lieu of foreclosure. The servicer must refer a borrower who is not meeting loan obligations to a HUD-approved housing counseling agency. If the default is not cured within 30 days of the notice, the servicer must ask HUD to approve calling the loan due.
If those options are unavailable, declined or used up, the servicer may review you for a written repayment plan to pay back property charges it advanced, after deciding whether you can support it. For a borrower who cannot support a plan or whose plan did not work, the servicer may ask HUD for more time before foreclosure when the youngest living borrower is at least 80 and there are critical circumstances, such as a supported terminal illness or substantiated long-term physical disability. HUD decides whether to grant it. Neither option is promised. This page covers a living borrower; what happens after the last borrower dies is on our reverse mortgage after death page.
Why choose Saxton to explain the risks
This page is for homeowners 62 and older, and their adult children, who want a straight answer about what can put the home at risk.
Short Care Stays Are Allowed
A borrower who is temporarily in a health care institution keeps the home as a principal residence, as long as the stay does not exceed 12 consecutive months.
Tell The Servicer When Away
You are responsible for telling the servicer about absences from the home longer than two months. That helps avoid a finding that your principal residence has changed.
One Yearly Occupancy Check
Each year the servicer must get your certification that the home is still your principal residence. It can be done on paper, electronically or verbally.
A Set-Aside Can Pay Bills
With a fully funded set-aside, the lender pays property taxes and insurance directly to the billing agency from loan proceeds. If it pays a bill late, it must pay the late fees from its own funds.
Non-Recourse With Conditions
A HECM is non-recourse. You or your estate will never owe more than the loan balance or the value of the home, whichever is less, and no assets other than the home must be used to repay the debt.
A Default May Be Cured
Before a foreclosure, a property charge default may be cured by getting current on all property charges, repaying the servicer’s advances and fixing any other reason for default. Reinstatement has limits, covered in the questions below.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers about keeping your home with a HECM.
Yes, if the loan’s terms are not met. A HECM becomes due when the last surviving borrower dies, sells or permanently moves away, or when the borrower does not pay property taxes and insurance on time or does not keep the home maintained and repaired. It can also become due if a borrower is away for more than 12 consecutive months because of illness and no other borrower lives there. Before the loan is called due for an unmet obligation, HUD must approve it and the lender must notify you of the specific obligation.
It can lead there if it is not resolved, but not overnight. If loan funds cannot cover the bill, the servicer sends notices and gives you 30 days to pay. If the default is not cured, the servicer asks HUD to approve calling the loan due. After HUD approves, you get a notice and 30 days to respond. On loans with FHA case numbers assigned on or after September 19, 2017, if the loan is still not paid or the default cured, the first legal step toward foreclosure must come no later than six months after HUD’s approval, unless the time frame is extended.
A temporary stay in a health care institution does not end your principal residence status as long as it does not exceed 12 consecutive months. If a borrower is away for more than 12 consecutive months because of physical or mental illness, and no other borrower lives in the home as a principal residence, HUD may approve calling the loan due. Tell the servicer about any absence longer than two months.
Yes. The servicer must get a yearly certification from you, and from any eligible non-borrowing spouse, that the home is still the principal residence. It can be done on paper, electronically or verbally.
If the servicer becomes aware that the home’s condition has deteriorated, it must notify you of the problem and give you 60 days to begin correcting it. It keeps checking until repairs are done. If you do not begin repairs within 60 days, or do not make satisfactory progress, the servicer must follow the due and payable rules.
For reasons other than death, the servicer must send a notice within 30 days of HUD’s approval. It must state specifically which obligation was not met and give notice of housing counseling and any loss mitigation options. You then have 30 days to say whether you will pay the loan in full, sell the home for at least the lesser of the balance or 95 percent of the current appraised value, give a deed in lieu of foreclosure, or correct the problem.
Not always. Before a foreclosure sale, the servicer must let you cure the default and reinstate the loan, unless it already accepted a reinstatement in the past two years, reinstatement would prevent a later foreclosure, or it would hurt the priority of the HECM lien. Foreclosure costs and reasonable attorney fees may be added to the loan balance.
No. A set-aside pays property taxes and insurance, but the funds may be insufficient to last the full projected period. You still pay other property charges, such as HOA dues, and you are responsible for all property charges once the funds are insufficient or run out. FHA’s HECM rules let you choose a fully funded set-aside even when one is not required. With a partially funded set-aside, which our program may require only on adjustable-rate loans, you receive funds twice a year and must pay the taxing authority and insurer on time yourself.
Find out what you qualify for
Tell us about your home and how long you plan to live there, and we will go over what the loan would ask of you before you schedule counseling.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.