Quick Answer
A reverse mortgage borrower has four ongoing obligations for the life of the loan — pay property taxes, maintain homeowner's insurance, occupy the home as a primary residence, and keep the property in reasonable repair — plus one annual administrative task, returning the occupancy certification the servicer mails each year.
- Pay property taxes on time, every year.
- Maintain homeowner's insurance continuously, with no lapse.
- Occupy the home as your primary residence.
- Keep the property in reasonable repair.
- Return the annual occupancy certification the servicer mails.
- Failure on any of these can trigger the loan becoming due and payable.
Key Facts
| Topic | Key Fact |
|---|---|
| Property taxes | Borrower responsibility unless a LESA was established |
| Homeowner's insurance | Must be maintained continuously; lapse is a default trigger |
| HOA dues | Borrower responsibility where applicable |
| Occupancy | Primary residence; 12-month absence triggers due and payable |
| Property condition | Reasonable repair; servicer may inspect |
| Occupancy certification | Mailed annually; must be returned |
| LESA effect | Servicer pays taxes and insurance from the set-aside |
| Leading default cause | Property charge delinquency |
Detailed Explanation
Property charge delinquency is the leading cause of reverse mortgage default, and it is entirely preventable. Property taxes and homeowner's insurance must be paid on time for the life of the loan. Unlike a conventional mortgage where these are typically escrowed automatically, a reverse mortgage borrower without a Life Expectancy Set-Aside pays these directly. A borrower who has had payments escrowed for thirty years and suddenly becomes responsible for writing the checks themselves is at genuine risk of missing one — this transition deserves explicit attention at closing.
The Life Expectancy Set-Aside eliminates this risk for borrowers who have one. A LESA reserves funds from the principal limit and the servicer pays taxes and insurance directly from it. Borrowers who were required to take a LESA because of thin residual income or a delinquency history often view it as a penalty, but functionally it removes the single largest default risk from their file. Borrowers who were not required to take one may elect a voluntary LESA if they want the same protection.
The occupancy requirement means the home must be the borrower's primary residence. A borrower who is absent for more than twelve consecutive months — for any reason, including medical care — triggers the loan becoming due and payable. Shorter absences are permitted, which accommodates hospitalization, rehabilitation, extended family visits, and seasonal travel within reason. Borrowers planning extended absences should notify the servicer proactively rather than letting the servicer discover it through a returned certification.
The annual occupancy certification is a simple form the servicer mails, typically near the anniversary of closing. The borrower signs and returns it, confirming they still occupy the property. Borrowers who ignore it — often because it looks like junk mail from a company they do not recognize — receive follow-up notices and, if those are also ignored, may face default proceedings on a loan that is otherwise entirely current. This is the most avoidable problem in reverse mortgage servicing and it happens constantly.
Jay Zayer, CRMP — 18 Years Experience
The obligation I worry about most is insurance, and specifically in California. A client gets a non-renewal letter from State Farm, puts it on the counter, and deals with it in three weeks. In the meantime there is a coverage gap and the servicer's system flags it. Now we have a problem that did not need to exist. I tell every California client: a non-renewal notice is a same-week item, and the moment you have replacement coverage, send the declarations page to the servicer. The second thing is simpler — open the servicer mail. That annual form is not junk.
Who This Is Right For
This may be a good fit if:
- All reverse mortgage borrowers, particularly those newly transitioning from escrowed payments to direct payment
- Family members or trusted contacts helping a borrower manage the loan
This may NOT be the right fit if:
- There is no situation where understanding the ongoing obligations would be inappropriate
Common Misconception
Myth: Once a reverse mortgage closes there are no further obligations.
Fact: Four obligations continue for the life of the loan: property taxes, homeowner's insurance, primary residence occupancy, and reasonable property maintenance. Failure on any of these can trigger the loan becoming due and payable, and property charge delinquency is the leading cause of reverse mortgage default.
Source: HUD Handbook 4000.1; HUD Mortgagee Letter 2015-11
Authoritative Sources
People Also Ask
What happens if I miss a property tax payment?
The servicer will contact you and may advance the payment, creating an obligation you must repay. Continued delinquency can result in the loan becoming due and payable. Contact the servicer immediately if you anticipate difficulty.
What is the annual occupancy certification?
A form the servicer mails each year asking you to confirm you still occupy the home as your primary residence. Sign and return it promptly — ignoring it is a common and entirely avoidable cause of default proceedings.
Can I travel or be hospitalized without triggering default?
Yes. The trigger is absence exceeding twelve consecutive months. Shorter absences for hospitalization, rehabilitation, or travel are permitted. Notify the servicer proactively for extended absences.