Picture a 75-year-old homeowner who has lived in the same house for decades, never borrowed a dime against a reverse mortgage, and owes nothing on the original loan balance. Now picture that homeowner receiving a foreclosure notice. Not because the bank called the loan due or the balance ballooned beyond the home’s value, but because a single year’s property taxes went unpaid.
It happens more often than most people realize. Under federal rules governing Home Equity Conversion Mortgages (HECMs), the only reverse mortgage insured by the government, borrowers must keep paying property taxes, homeowners insurance, and flood insurance (where applicable) for as long as they live in the home. When those payments lapse, the loan goes into default, and the servicer is directed to begin the foreclosure process. The regulation spelling this out, 24 CFR Section 206.205, is not a technicality. It is the core contract every HECM borrower signs.
The federal rules that make this possible
Reverse mortgages are marketed as a way to eliminate monthly mortgage payments, and they do eliminate principal-and-interest payments. But the obligation to cover property charges never goes away. Under 24 CFR Section 206.205, borrowers remain on the hook for property taxes, hazard insurance, flood insurance, and basic home upkeep. Miss those, and the loan is in default, regardless of whether the borrower has ever drawn a single dollar.
The timeline can move fast. HUD Mortgagee Letter 2015-11 requires servicers to begin monitoring a borrower’s account once taxes or insurance are just 30 days delinquent. That means the window between a missed bill and a formal default notice is often far shorter than borrowers expect.
The Consumer Financial Protection Bureau and the Federal Trade Commission both warn borrowers explicitly: failing to pay property charges on a reverse mortgage puts you at risk of losing your home. These warnings are not buried in fine print. They are central to every federally insured reverse mortgage issued in the United States.
How widespread the problem became
A 2019 audit by the HUD Office of Inspector General revealed that nearly 13,000 HECM loans had defaulted because of unpaid property charges, carrying maximum claim amounts that could exceed $2.5 billion in potential losses to the federal insurance fund. Worse, HUD was not even tracking those defaults at the time. The borrowers had not failed to repay their loans. They had fallen behind on tax and insurance bills.
Testimony from the Government Accountability Office the same year (GAO-19-721T) reinforced the pattern: most HECM defaults stem from occupancy violations or failure to pay property charges, not from an inability to repay the loan itself. The very homeowners these products were designed to help were losing their homes over bills that had nothing to do with the mortgage balance.
Servicer conduct has made things worse in some cases. In 2016, the CFPB took enforcement action against Sutherland Global and NOVAD Management Consulting for reverse-mortgage servicing failures that included communication breakdowns with borrowers trying to avoid foreclosure. When a servicer fails to send clear, timely notices, a fixable default can spiral into a lost home.
Both the OIG audit and the GAO testimony are now several years old. No comparable federal review has been published since, which means the current national scope of property-charge defaults is difficult to measure. But the underlying conditions that drove those numbers, rising property tax assessments and climbing insurance premiums, have not eased. If anything, they have intensified.
The data gaps that should concern everyone
The public record has significant holes, and those holes are themselves part of the story. The 2019 HUD OIG audit documented the volume of untracked defaults but did not publish borrower-level case files, demographic breakdowns by age, income, or geography, or direct accounts from affected homeowners. As of mid-2026, no federal dataset provides current national or state-level counts of property-charge defaults initiated in 2025 or 2026.
There are also unanswered questions about whether HUD improved its tracking systems after the OIG flagged the problem, and whether any states have passed targeted protections for reverse-mortgage borrowers facing property-charge foreclosures. Those gaps matter because without reliable data, policymakers, counselors, and families are working partly blind.
One area that deserves particular scrutiny is the Life Expectancy Set-Aside, or LESA. A LESA is a reserve fund established at loan origination to cover future property taxes and insurance premiums. HUD requires lenders to set one up for borrowers who do not meet certain financial benchmarks during underwriting. In theory, a LESA should prevent property-charge defaults entirely for those borrowers. In practice, no servicer-level data in the public record shows how often LESAs succeed or fall short, particularly when tax assessments rise faster than the set-aside anticipated. That is a blind spot worth watching.
What to do if you receive a default or delinquency notice
A default notice on a reverse mortgage is serious, but it does not mean foreclosure is a foregone conclusion. Under HUD’s loss mitigation framework, servicers must notify borrowers when property charges become delinquent and offer options to cure the default before referring the loan for foreclosure. That process can take months, which gives borrowers who act quickly a real chance to resolve the issue.
The CFPB’s step-by-step guidance for borrowers who receive a delinquency notice recommends contacting the loan servicer immediately to request a written account of what is owed, any deadlines, and what repayment or cure options are available. Borrowers should keep copies of every letter, email, and phone log. If a servicer’s information seems wrong or incomplete, that documentation becomes critical for filing complaints with the CFPB or state regulators.
HUD-approved housing counselors are another resource worth using. They can review the reverse-mortgage documents, explain the borrower’s rights under federal servicing rules, and help identify state or local property-tax relief programs, senior exemptions, or deferrals that could reduce the immediate financial burden. Counseling is available at no cost through HUD’s network, and for borrowers who feel overwhelmed by the paperwork, it can make the difference between a resolved default and a foreclosure filing.
Preventing the problem before it starts
For borrowers who are current on their obligations, the single most important thing to understand is that a reverse mortgage does not eliminate all housing costs. Property taxes, homeowners insurance, and maintenance remain the borrower’s responsibility for as long as they live in the home.
Before taking out a reverse mortgage, prospective borrowers should project their long-term ability to cover those costs. That means factoring in the near-certainty that tax assessments and insurance premiums will rise over time, sometimes sharply. Asking lenders detailed questions about LESA options is worth the effort, even when a LESA is not required based on the financial assessment. Borrowers can request one voluntarily. Knowing how much is set aside, what assumptions about future costs were used, and what happens if those assumptions prove too low can prevent the kind of surprise that leads to default years down the road.
Why families and caregivers cannot afford to ignore this
Reverse-mortgage borrowers are, by definition, at least 62 years old, and many are well into their 70s and 80s. Cognitive decline, illness, hospitalization, or simple confusion about paperwork can cause a tax or insurance bill to go unpaid. One missed payment can start a chain of events the borrower may not fully understand.
Family members and caregivers who know a relative holds a reverse mortgage should consider setting up automatic payments for property taxes and insurance, creating calendar reminders for due dates, and arranging shared access to loan statements and servicer correspondence. If a servicer fails to provide accurate or timely information, relatives can help document those interactions and, if necessary, file complaints with the CFPB or the borrower’s state attorney general.
How missed property charges still cost homeowners their houses in 2026
The verified record is clear: property-charge defaults on reverse mortgages lead to foreclosures, and they happen to borrowers who owe nothing on the loan itself. What remains unclear, because the data simply does not exist in the public record, is how many homeowners are vulnerable right now and which communities are bearing the heaviest losses. Until better federal tracking and reporting catch up to the scale of the problem, the strongest protections available are knowing the rules, acting on delinquency notices immediately, and using every available counseling and legal resource to keep a missed bill from becoming a lost home.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
