With a federally insured Home Equity Conversion Mortgage (HECM), the borrower retains ownership of the property while continuing to live there throughout the loan. They are not required to make monthly mortgage payments during that time.

Reverse mortgages are often misunderstood, and a common misperception is the idea that in a reverse mortgage, “the bank takes the home.” On the contrary, if the borrower meets the loan terms, the borrower retains ownership of the home throughout the loan term.

The loan balance grows over time, and if the borrower moves or dies, the borrower and their estate are responsible for repaying the loan. However, there are still events that can lead to a borrower defaulting on the loan, which can, in turn, result in foreclosure and loss of your home.

#1. Failure to Maintain Property Charges

If a reverse mortgage borrower defaults on property taxes, the borrower would face local government enforcement action for nonpayment, and the reverse mortgage would be at risk of being called due and payable.

Property taxes must be paid on time to keep the loan in good standing; if taxes go unpaid, the taxing authority may place a lien on the home.

This puts the reverse mortgage lender at risk since a reverse mortgage takes the first-lien position on the home. Some localities offer resources for borrowers if they have difficulty paying their property taxes.

For instance, several states allow deferring property taxes (though they must still be repaid later). Others offer assistance programs designed to help homeowners cover their property taxes.

Resources on some of these programs are available on the Consumer Financial Protection Bureau (CFPB) website.

#2. Failure to Maintain Homeowners Insurance

The same reasoning applies to maintaining homeowners’ insurance.

Reverse mortgage lenders want to avoid as much risk as possible, so homeowner’s insurance is a requirement for all reverse mortgage properties.

#3. Failure to Maintain Your Home in Reasonable Condition

Reverse mortgage borrowers are responsible for keeping their homes up to FHA standards. If the home falls into disrepair, it can trigger a foreclosure and require you, as the borrower, to vacate the home.

There are a few specific requirements that, if not met, could trigger a default and, if not resolved, lead to foreclosure.

#4. Failure to Occupy Your Home as a Primary Residence

If you move, your loan becomes due and payable. According to the terms of a reverse mortgage, the home you are borrowing against must remain your primary residence for the life of the loan.

Therefore, most reverse mortgage companies advertise that you can remain in your home without making monthly mortgage payments until you move out or pass away.

If you move out of the home and a routine occupancy check indicates you no longer reside there, the reverse mortgage servicer will request repayment of the loan.

The lender may initiate foreclosure proceedings to recover the outstanding balance if the loan is not repaid. If you move or leave the home and do not maintain your primary residence, the servicer can call the loan due and payable.

#5. Non-Borrowing Spouses Must Be Disclosed to Gain Protection

Similarly, if you — as the primary borrower — pass away before your spouse and are not listed on the loan as either a co-borrower or non-borrowing spouse, then that spouse could face a foreclosure action.

In recent years, new protections have been instituted for the non-borrowing spouses of reverse mortgage borrowers. Still, it is always advised that an affected couple inform the lender and servicer of everyone involved in the transaction at every possible step.

Top FAQs

Summary — You Can Lose Your Home in a Reverse Mortgage If:

• You leave the home
  • For six months or more out of a year for a non-medical reason
  • For 12 consecutive months
  • You pass away, and your remaining spouse is not listed as a borrower or non-borrowing spouse.
• You do not keep up with property taxes
• You fall behind on homeowner’s insurance payments
• You allow the home to fall into disrepair

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