How do you trigger a default on a reverse mortgage? One of the ways to trigger a default is failure to pay taxes and insurance on the property that secures the reverse mortgage and the fear of headline risk is giving some lenders and servicers pause before declaring defaults on seniors. According to a recent story by Reverse Mortgage Daily, Fannie Mae has begun to remind servicers they must follow HUD guidelines regarding tax and insurance defaults for reverse mortgage customers. In order for servicers to proceed to foreclose, these servicers must submit a request to HUD for approval to proceed.
In the event HUD green lights the foreclosure, seniors are being provided six months to “cure” the default by bringing taxes current if delinquent or having their homeowners insurance re-instated. Many servicers are examining the loan to value on the home before taking aggressive steps to pursue the defaults and this curative approach to this problem is endorsed by the reverse mortgage industry as a solution to the problem. While the number of tax and insurance defaults is very low, it still reminds the public that it is possible to default on and have a reverse mortgage foreclosed upon.
