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 is 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 as follows:
- Maintain proper insurance on the property;
- Ensure that the property insurance premiums are paid on time and in full to avoid any lapses in, or cancellations of, coverage;
- Ensure that the property taxes are paid on time and in full;
- 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
- 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 Fort Lauderdale foreclosure defense attorneys to discuss what options you may have. Loan Lawyers 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.