A HECM removes the required monthly principal-and-interest coupon. It does not remove ownership duties. You must keep property taxes, homeowners insurance, and any HOA current, and you must live in the home as your principal residence (24 CFR 206.39). Jay Zayer, a Certified Reverse Mortgage Professional serving California and Arizona, treats those duties as the real monthly work after closing.
24 CFR 206.205 lets the mortgagee pay property charges from your funds or take servicing action if you do not. Ignore that section and the “no payment” slogan becomes a default letter.
Property charges that stay on your calendar
County tax bills still arrive. Insurance still renews. HOA ledgers still run. If a LESA was required at origination, the servicer may pay taxes and insurance from that set-aside. You still must report HOA changes and keep coverage that meets the mortgagee clause.
Flood insurance is not optional in a mapped flood zone. Dropping it because the HECM “pays the house” is a charge default.
California Proposition 13 keeps many tax bills stable until a change in ownership. Arizona assessed values can move more. Neither state’s tax system is paid by FHA as a benefit.
Occupancy rules that can accelerate the loan
The home must remain your principal residence. 24 CFR 206.27(c) addresses occupancy certifications. Extended stays in a hospital or assisted living have HUD paths. A silent move to a child’s house does not.
You may travel. You may not abandon the property. Utilities shut off and mail piled up are how servicers learn occupancy failed before you send a letter.
Renting the entire home as a long-term rental violates the occupancy premise. See renting out the home before you list it.
What to do if a tax bill or insurance lapse is coming
Call the servicer before the lapse. A Life Expectancy Set-Aside cannot be added or modified after the HECM has closed. It is set at origination from the financial assessment. If a LESA already exists, ask whether it can pay the charge. If it does not exist, paying from a remaining line of credit is often faster than waiting for a workout letter.
Suppose the balance due on a Fresno tax installment is $2,400 and the remaining HECM line covers it. Drawing to pay the county is usually cheaper than letting 24 CFR 206.205 servicing start. That draw is a use of credit, not a new approval.
Keep the counseling packet. It lists these duties in writing. For the event that ends the loan even when you did everything right, read when you repay.
What happens if a charge is late, in the order servicing actually uses?
24 CFR 206.205 authorizes the mortgagee to pay property charges when the borrower does not, and to recover those amounts through the loan or through servicing action. Mortgagee Letter 2023-23 separately requires an annual occupancy certification and tells servicers to have borrowers report absences longer than two months. Those are two different clocks. Mixing them is how families miss both letters.
- A tax or insurance notice arrives. Pay it, or confirm a LESA that was built at origination will pay it.
- If you cannot pay, call the servicer before the county or carrier lapses the item. Ask about a draw from unused credit.
- If the charge is already delinquent, 24 CFR 206.205 servicing can start. That is not a new origination. It is a default path.
- Occupancy is certified annually. A health-care absence that is not a silent move still has to be reported when it exceeds two months (Mortgagee Letter 2023-23).
- A health-care stay longer than twelve consecutive months, with no other borrower in the house, can make the loan due under 24 CFR 206.27(c)(2)(ii).
This product does not help a household that treats “no monthly P&I” as “no bills.” Jay will decline a file whose only plan is to stop paying the HOA. It does not help someone who will live most of the year in another state and treat this house as a rental. See renting with a reverse mortgage.
What can go wrong: flood insurance in a mapped zone is dropped because the HECM “pays the house.” Flood coverage is a property charge. Dropping it is a default. Another failure: the annual occupancy letter goes to an old address after a stay with a child, and the servicer starts a due-and-payable file while the borrower still intends to return. Update the mailing address when you travel.
A LESA, if one exists, pays only the charges the origination worksheet included. Dues often remain on you. Read that worksheet once a year the same week the occupancy letter arrives. For how a LESA is built, see Life Expectancy Set-Aside.
A follow-up: can you pay the HOA from unused HECM credit after closing? Yes, if unused credit exists and the payment plan allows a draw. That draw is debt. It is not a new LESA. Dues that were never in the origination worksheet stay on you unless you pay them, from a draw or from other funds. Do not wait for servicing to invent a holdback.