Unlike a standard mortgage where the borrowing homeowner must repay the
mortgage loan by making monthly mortgage payments to the lender, the lender
of a reverse mortgage actually pays the borrowing homeowner by extending
a line of credit. The purpose behind a reverse mortgage is to allow the
borrowing homeowner to convert equity in the home into cash that may be
used to supplement a lower income and thereby afford to pay other cost-of-living
expenses. Reverse mortgages are regulated by the United States Department
of Housing and Urban Development, Federal Housing Administration, and
are intended for elderly homeowners who typically are retired and whose
source of income is often only Social Security. The eligibility requirements
for a reverse mortgage include that the homeowner be at least 62 years
of age and actually live in the home as his or her primary residence.
In other words, if you are younger than 62 and/or are not living in the
property or are using it as an investment property to generate rental
income, then you would not qualify for a reverse mortgage.
If you have met the eligibility requirements and have been given a reverse
mortgage loan, it is important to understand what your obligations to
the lender actually are, so that you may avoid a foreclosure situation.
As the borrowing homeowner, your obligations to the reverse mortgage lender
are stated in the mortgage document itself, often titled as a “Home
Equity Conversion Mortgage.” With the majority of reverse mortgages,
the borrowing homeowner’s obligations to the lender typically are
(1) Maintain proper insurance on the property;
(2) Ensure that the property insurance premiums are paid on time and in
full to avoid any lapses in, or cancellations of, coverage;
(3) Ensure that the property taxes are paid on time and in full;
(4) If there is a homeowners association or condominium association, ensure
that the regular assessments and special assessments are paid on time
and in full to avoid the association placing a lien against the property; and
(5) Timely and regularly provide the lender proof of insurance coverage
and payment of property taxes.
If you fail to maintain property insurance, fail to pay the property taxes,
and/or otherwise fail to provide the lender proof of insurance coverage
and payment of property taxes, you will be considered to be in default
on the reverse mortgage, and the lender may ultimately proceed to file
a foreclosure lawsuit against you.
Oftentimes, the borrowing homeowner may have always maintained property
insurance and paid the property taxes, but may have forgotten to provide
the lender proof of insurance coverage and payment of property taxes.
If the lender threatens a foreclosure lawsuit or actually proceeds with
filing a foreclosure lawsuit, the borrowing homeowner may still avoid
losing the home in foreclosure if he or she promptly provides the lender
written proof of insurance coverage and payment of property taxes before
any scheduled foreclosure auction of the property.
If the lender believes, however erroneously, that there have been lapses
in insurance coverage and/or payment of property taxes, the lender may
be able to foreclose on your home if you are unable to prove in writing
that you have maintained continuous insurance coverage and payment of
property taxes. It is therefore extremely important that the borrowing
homeowner maintain written records of all insurance coverage documents
and receipts of payment of property insurance premiums and property taxes.
If you have a reverse mortgage loan and are facing foreclosure, we encourage
you to schedule a free consultation with one of our foreclosure defense
attorneys to discuss what options you may have. For more information about
please click here. Loan Lawyers, LLC has helped over 5,000 South Florida homeowners and
consumers with their debt problems. Please do not hesitate to
contact us to see how we may be able to help you.