No monthly mortgage payment ever comes due on a reverse mortgage, which is often the entire appeal for a retiree relying on Social Security and savings. But two ordinary homeownership costs keep coming due anyway, and missing either one can put the home itself at risk. Property taxes and homeowners insurance sit outside the loan balance on a Home Equity Conversion Mortgage, the reverse mortgage program insured by the Federal Housing Administration, and falling behind on either is grounds for foreclosure even though nothing is owed on the mortgage itself.
The HECM Program’s Tax And Insurance Condition
The Department of Housing and Urban Development’s own guidance on the Home Equity Conversion Mortgage program states that borrowers “may reside in their homes indefinitely as long as property taxes and homeowner’s insurance are kept current.” That single sentence carries more weight than it might appear to at first. A HECM eliminates the monthly principal-and-interest payment that comes with a traditional mortgage, but it does not eliminate the borrower’s underlying obligations as a homeowner. The loan is secured by the property, and an unpaid tax bill or a lapsed insurance policy exposes the lender’s collateral just as it would with any other mortgage, which is why the requirement survives even when nothing else about the loan resembles a conventional one.
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How A Missed Tax Or Insurance Bill Becomes A Default
The Consumer Financial Protection Bureau lays out the mechanics directly: HECM borrowers are required to keep current on property taxes and homeowners insurance, and the bureau’s own guidance states plainly that failure to pay either may lead to foreclosure. Some HECM borrowers set aside a portion of their loan proceeds at closing specifically to cover future tax and insurance bills, a mechanism built into the loan structure precisely because servicers know this is where defaults happen. Loan servicers are also required to track whether a borrower’s property charges are current and, in many cases, will advance funds on the borrower’s behalf to cover a missed tax or insurance bill and then bill the borrower for that advance, a step meant to catch a lapse before it becomes a foreclosure case. When no set-aside exists, or when one runs out while the borrower is still living in the home, the full responsibility for those payments shifts back onto the borrower for the remainder of the loan term. A missed payment does not trigger immediate foreclosure, but it starts a servicing process that can end there if it goes unresolved.
Federal Loss-Mitigation Options Exist Before Foreclosure Starts
HUD has expanded the tools servicers can offer a HECM borrower who falls behind on property charges rather than moving straight to foreclosure, including eliminating an old ban on offering more than one repayment plan to a borrower who has fallen further behind. A borrower who receives a notice of delinquency or default has options laid out in a separate CFPB guide on what to do after receiving that notice, which points toward repayment plans and HUD-approved counseling before a case reaches foreclosure. Area Agencies on Aging also maintain state and local assistance programs that can cover a tax or insurance bill for an eligible homeowner, and a HUD-approved reverse mortgage counselor can help identify which of those programs applies before a missed payment compounds into something more serious. Reaching out as soon as a bill goes unpaid, rather than after a formal notice arrives, generally leaves more repayment options on the table than waiting until a servicer has already begun the foreclosure process.
Why This Condition Rarely Makes The Sales Pitch
Reverse mortgage marketing tends to emphasize what a borrower no longer has to pay, not what still has to be paid. The tax and insurance requirement is disclosed in loan paperwork and covered in the mandatory HUD counseling session every HECM borrower completes before closing, but it is easy for a borrower years into the loan to lose track of an obligation that was mentioned once at the start and never billed by the lender directly. That counseling session is required precisely because the government insures the loan and has an interest in borrowers understanding the property-charge condition before they sign, not after a default notice arrives.
For a surviving spouse who was not named on the loan, or for an adult child managing an aging parent’s finances, checking whether property taxes and insurance premiums are actually being paid, not just whether the mortgage itself shows a zero balance, is the difference between a HECM that works as intended and one that ends in a foreclosure filing. A reverse mortgage eliminates one bill; it does not eliminate homeownership, and the taxing authority or insurance carrier involved has no reason to know the home is financed with a HECM rather than a traditional mortgage, or any reason to treat a missed payment differently because of it.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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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.
