Property Tax and Insurance Default on a Reverse Mortgage
Why this matters most
Unlike payment default on a forward mortgage, property charge default is the primary foreclosure driver on HECM loans.
LESA (Life Expectancy Set-Aside)
If the financial assessment shows risk, the lender may set aside part of your proceeds to pay taxes and insurance directly.
Prevention
- Set up escrow-like budgeting even if not required
- Enroll in property tax deferral programs if your state allows (consult advisor)
- Keep insurance current; notify servicer of policy changes
When this is NOT a good fit
- You cannot reliably pay property taxes, homeowners insurance, and maintenance
- You plan to move within a few years
- You need every dollar of home equity preserved for heirs
- Medicaid or SSI eligibility depends on keeping assets below program limits (consult an elder law attorney)
- You were pressured by a salesperson without time to research alternatives