Homeowners who took out a reverse mortgage expecting to stay in their home indefinitely can lose that home to foreclosure if they fall behind on property taxes or hazard insurance. Federal regulations, the Consumer Financial Protection Bureau, and the Federal Trade Commission all classify these ongoing costs as the borrower’s responsibility, even after a Home Equity Conversion Mortgage (HECM) has been funded. The risk is sharpest for fixed-income seniors whose property-tax bills have climbed while their cash flow has not.
Property-tax defaults now trigger HECM foreclosures
A reverse mortgage eliminates monthly principal-and-interest payments, but it does not eliminate the obligation to keep property taxes and homeowners insurance current. The Congressional Research Service report on FHA-insured HECMs lists unpaid property charges among the events that make a reverse mortgage due and payable. Once a loan is called due, the borrower must repay the full balance or face foreclosure and the forced sale of the home.
Federal regulation 24 CFR 206.205 spells out the borrower’s duty to pay property taxes and maintain hazard and flood insurance. The CFPB defines “property charges” to include taxes, homeowners insurance, and similar obligations. When those charges go unpaid, the servicer has authority under the same regulation to advance funds, add those advances to the loan balance, and ultimately act on the delinquency, up to and including initiating foreclosure proceedings.
The hypothesis that rising property-tax assessments in high-growth counties are pushing more fixed-income HECM borrowers into their first missed payment is plausible on its face. Tax bills in fast-growing areas can jump by double-digit percentages in a single reassessment cycle, while Social Security cost-of-living adjustments and pension income tend to move more slowly. No publicly available HUD dataset currently isolates property-charge defaults from other HECM foreclosure triggers, so the precise scale of this problem cannot be confirmed with existing data. The gap itself matters: without loan-level reporting, neither regulators nor borrowers can measure how quickly tax-driven defaults are growing.
Federal agencies agree on the foreclosure path
Multiple federal bodies describe the same sequence. The Office of the Comptroller of the Currency states that a reverse mortgage becomes due if the borrower does not pay property taxes or hazard insurance. The FTC warns borrowers that they must continue paying property taxes and insurance and maintain the home to avoid default. The CFPB confirms that borrowers can receive default notices tied to being behind on these charges and that unresolved delinquencies can lead to foreclosure.
Lenders are not required to foreclose immediately. The Congressional Research Service notes that servicers may give borrowers an opportunity to become current before proceeding. HUD publishes Mortgagee Letters that outline detailed servicing steps, including requirements to notify borrowers of the delinquency, offer repayment plans where feasible, and document efforts to cure the default before calling the loan due and payable. In practice, this can translate into a short window in which a homeowner can pay the overdue taxes or insurance, enter a structured repayment agreement, or seek assistance from family members or local aid programs.
If the borrower cannot cure the default or agree to a workable plan, the servicer can request that HUD approve the loan’s due-and-payable status. Once approved, the servicer may begin foreclosure under state law. Because HECMs are non-recourse loans, the borrower or heirs will not owe more than the home’s value at sale, but they can still lose the property itself. For seniors who expected the reverse mortgage to secure housing stability, the loss of the home due to unpaid taxes or insurance can come as a shock.
What at-risk borrowers can do
For homeowners already behind on property charges, prompt communication with the servicer is critical. Federal guidance encourages borrowers to respond immediately to delinquency letters, ask about available repayment options, and provide documentation of any hardship. In some cases, servicers may spread arrears over future draws or accept partial payments over time, although these arrangements depend on program rules and the borrower’s remaining equity.
Borrowers who are current but worried about rising taxes or insurance can take preventive steps. Reviewing annual tax bills and insurance renewals, building those costs into a household budget, and setting aside part of any remaining HECM credit line for future property charges can reduce the risk of default. Some local governments offer tax relief, deferrals, or exemptions for older or low-income homeowners; applying early can help keep bills manageable. Independent housing counselors approved by HUD can also help seniors understand their obligations and evaluate options before a missed payment snowballs into a foreclosure threat.
The core message cutting across federal regulations and consumer advisories is consistent: a reverse mortgage can remove the burden of monthly principal-and-interest payments, but it does not remove the responsibility to pay taxes, insurance, and other property charges. For aging homeowners who want to remain in their homes, treating those ongoing costs as a non-negotiable line item is essential to keeping the promise of housing security that a HECM is often assumed to provide.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
