With a Federal Housing Administration-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, that borrower maintains ownership of the home throughout the entire course of the loan.

The loan balance grows over time, and when the borrower moves or passes away, the borrower and his estate are responsible for the repayment of the loan.  However, there are still events that can lead to a borrower defaulting on the loan, which can, in turn, lead to foreclosure, resulting in you losing your home.

ARLO teaching how to lose home with reverse mortgage

#1. Failure to maintain property charges

If a reverse mortgage borrower were to default on the payment of property taxes, then in addition to contending with the local government over non-payment, the reverse mortgage is also at risk of being called due and payable.

Property taxes must be paid on time to keep the loan in good standing because if taxes go unpaid, the taxing authority would have the right to 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 the deferment of property taxes (though they will still have to be repaid later).  Others offer assistance programs designed to help homeowners cover their property taxes.

Resources about some of these programs can be found on the Consumer Financial Protection Bureau (CFPB) website.

#2. Failure to maintain homeowners insurance

Similar reasoning applies to the necessity of keeping up with homeowner’s insurance.

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

#3. Failure to maintain your home in reasonably good condition

Reverse mortgage borrowers are responsible for keeping their homes up to FHA standards.  This means that if the home falls into disrepair, this can trigger a foreclosure action and force you, as the borrower, to leave the home.

There are a few specific requirements that, if not met, could lead to a default event and eventual foreclosure if the default is not resolved.

#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 determines that you no longer reside there, the reverse mortgage servicer will ask for the loan to be repaid.

The lender may initiate a foreclosure action to satisfy the loan repayment if it is not repaid.  If you move or leave the home and do not maintain 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.

Recent years have seen new protections 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


Can you lose your house with a reverse mortgage?

A Reverse mortgage is a loan with obligations to meet; therefore, you can lose your house with a reverse mortgage.  That said, as long as you live in your home as your primary residence, maintain your taxes and insurance, and keep the home reasonably, your loan will be in good standing.  The only way for the loan to be called due and payable is if you vacate the property permanently or fail to maintain the property’s taxes and insurance or upkeep.

Do you have to pay the property taxes with a reverse mortgage?

Yes, as the homeowner, you must pay the property taxes when you have a reverse mortgage.  If your reverse mortgage has a LESA (Life Expectancy Set Aside) for taxes and insurance, the property taxes will be paid from the set aside for as long as the funds last.  Suppose a homeowner has a LESA and lives longer than their life expectancy.  In that case, the funds in the LESA could run out, and if that were to happen, the responsibility for paying taxes and insurance would fall back to the homeowner.

What happens to a home with a reverse mortgage when the owner dies?

The loan becomes due and payable when the property owner and borrower on the reverse mortgage dies.  At that time, the heir(s) will contact the loan servicer to communicate their plans with the property.  The heir(s) can pursue one of several options depending on how much is owed on the property compared to its current value.

Heir(s) can sell the property to pay off the balance if the balance owed is less than the current value.  Heir(s) can pursue a refinance with their loan to pay off the balance if they qualify.  Heir(s) can pay off the balance with other funds such as life insurance or savings.  Heir(s) can assign the home to the loan servicer if the amount owed is greater than the home’s current market value.  In this scenario, the heir(s) are not obligated even to sell the property, and the servicer will sell the property.

Additionally, if the heir(s) wish to keep the home, they can pay 95% of the current assessed value to keep the property.  The mortgage insurance fund covers the loss as the reverse mortgage is non-recourse.  You cannot owe more than the value of the property.


How many reverse mortgages end in foreclosure?

The exact number of reverse mortgages that end in foreclosure is unknown, but it is possible to end in foreclosure on a reverse mortgage.  While it is more difficult to end in foreclosure with a reverse mortgage than a traditional one since you have no mandatory monthly mortgage payment, it is possible.  Suppose you vacate the property permanently, which is no longer your primary residence, or fail to maintain your property taxes or homeowners insurance.  In that case, your loan will be called due and payable.

How can I stop a reverse mortgage foreclosure?

A homeowner could pursue a few options to stop a reverse mortgage foreclosure.  One option would be to sell the property before the foreclosure process is completed.  While the timeframe varies from state to state, the foreclosure process usually takes several months to conclude legally, giving the homeowner enough time to sell the property in some cases.  Another option would be to refinance the loan to another type of loan product (if possible) or pay off the outstanding balance with other funds.  Lastly, the homeowner could pursue options with the servicer to rectify the situation.  If rectified promptly, it may be possible (not guaranteed) to cure the default and reinstate the loan into good standing.  An example of a timely rectification would be a missed tax payment due to a hospitalization or other extenuating circumstance that could be rectified relatively quickly.

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