Property charges

HECM Reverse Mortgage Property ChargesHECM reverse mortgage borrowers are required to required property charges current to remain in good standing with the HECM program. Required property charges most commonly include property taxes, homeowner’s insurance, flood insurance, HOA dues, ground rents, and special assessments, where applicable.

Paying required property-related expenses is a key requirement of the reverse mortgage program. As long as at least one borrower (or non-borrowing spouse) is living in the home and paying the required property charges, no mortgage payments are required.

If a borrower fails to keep up with the property charges, they risk triggering a maturity event that will make the HECM balance due and payable in full.

Nonpayment of property charges led to growing default problem

Defaults due to nonpayment of property taxes, insurance, etc., were a growing problem during the first two decades of the HECM program. The result was bad headlines for the HECM and losses for the FHA Mutual Mortgage Insurance Fund (MMIF), which insures HECMs. The long-term financial viability of the MMIF is key to the long-term viability of the HECM, so FHA decided to make a change. To address the problem, tighter lending guidelines were implemented in 2014.

Today, reverse mortgage lenders are required to more extensively analyze an applicant’s credit history and income in a process called financial assessment. The intent of financial assessment is to reduce defaults by making sure reverse mortgage borrowers have adequate financial resources (based on income) and demonstrate a financial willingness (based on credit) to maintain their financial obligations.

HECM applicants that fail financial assessment can still be approved by documenting certain extenuating circumstances, compensating factors, and/or opting for a life expectancy set aside (LESA).

A LESA is designed to ensure that the property charges are paid for borrowers with limited income and/or shaky credit histories. The lender simply sets aside a portion of the proceeds and uses them to pay the required property-related expenses for the rest of the estimated life span of the youngest borrower or non-borrowing spouse.

Check out our free reverse mortgage calculator

How much can you get from a reverse mortgage? Check out our free HECM reverse mortgage calculator. It's simple to use, fast, free, and no contact information is required. You can access the reverse mortgage calculator here. Our HECM for purchase calculator can be found here.

Updated for 2021: The Reverse Mortgage Revealed

The reverse mortgage is a fantastic financial tool, but it's not the perfect solution for everybody. Is it right (or wrong) for you?

Author Mike Roberts is the founder of and a successful reverse mortgage industry veteran. Writing in plain language, Roberts cuts through all the nonsense, rumors, and hype you may have heard about reverse mortgages. There are no sales pitches here!

This book is well-written, understandable, and packed with insights only an experienced professional can offer. You'll discover:

  • How a reverse mortgage really works.
  • Who should (and shouldn't) get a reverse mortgage.
  • Common myths and misconceptions.
  • Insider tips and tricks lenders don't tell you (and you likely won't find out anywhere else).
  • How to increase your payout & reduce closing costs (this alone is worth the cost of the book).
  • Pitfalls to avoid.
  • Why some applicants get approved and some don't.
  • How to finance a home purchase without a mortgage payment (yes, this is for real!).

Also included are detailed case studies based on real-life scenarios that tie key concepts and terms together. You'll see for yourself how a reverse mortgage can help you live a more enjoyable and financially secure retirement.

Available for Kindle or in paperback at Amazon. Click here to grab your copy now!