Who Pays Property Taxes on a Reverse Mortgage?

On a reverse mortgage, the borrower pays the property taxes. A Home Equity Conversion Mortgage (HECM) wipes out your monthly principal and interest payment, but you keep the title to your home, and every ownership cost that comes with it stays yours: property taxes, homeowner’s insurance, HOA or condo dues, and basic upkeep. The lender only holds a lien.¹ Miss those charges and the loan can be called due.²

Federal rules put this in writing. The HECM security instrument requires timely payment of all property charges, and you have to be able to show proof to the servicer.³

Something that catches new borrowers off guard: a HECM does not usually run your taxes and insurance through an escrow account. On a conventional forward mortgage, the lender collects a slice of the tax and insurance bill with each monthly payment and pays those bills for you. A reverse mortgage has no monthly payment, so there is no built-in escrow. You track the due dates. You write the checks. The only exception is when a set-aside or a voluntary payment arrangement is built into the loan, which is covered below.

What Happens if You Fall Behind on the Taxes

Unpaid property taxes are one of the fastest routes to a reverse mortgage default. The regulation is blunt: failure to pay property charges lets the lender declare the full loan balance due and payable.² It plays out in stages, though, and there are chances to fix it along the way.

Once the servicer sees that a tax bill is delinquent, it has to send you a written notice within 30 days. You then have 30 days to respond and explain what happened.⁴ That first window is the easiest place to resolve things.

If you do not cure the delinquency, the servicer can step in and pay the tax bill itself to keep the taxing authority from placing a lien. The advance, plus any penalties, gets added to your outstanding loan balance.⁵ If you still have HECM funds available, the servicer can draw from them; if a pattern of missed payments develops, it can start paying your property charges automatically from your loan proceeds going forward.

When no HECM funds remain and you cannot reimburse the servicer, the loan is called due and payable. The servicer has to notify HUD within 30 days, and foreclosure proceedings have to begin within six months.⁶

When the Servicer Pays the Taxes for You: LESA

If the underwriting suggests a borrower may not reliably pay property taxes and insurance, the lender has to carve out part of the HECM proceeds to cover those bills. That reservation is called a Life Expectancy Set-Aside, or LESA, and it comes in two shapes.⁴

Fully Funded LESA

A fully funded LESA sets aside enough money to cover the estimated property taxes and insurance premiums for the youngest borrower’s remaining life expectancy. The servicer pays those bills directly to the taxing authority and the insurance carrier before they go delinquent. You never touch the payment. Each disbursement is added to your outstanding loan balance when it’s paid.⁴ The trade-off is that a fully funded LESA reduces the cash available to you at closing.

Partially Funded LESA

A partially funded LESA is used when the borrower meets some but not all of the residual income requirements. Instead of the servicer paying the bills, LESA funds get disbursed to the borrower twice a year, and the borrower pays the taxing authority or insurance carrier. The servicer monitors whether the payment actually landed.⁴ If a borrower fails to pay even after receiving the disbursement, the servicer must notify the borrower and FHA within 30 days.

What Happens When the LESA Runs Out

A LESA is an estimate, not a guarantee. If taxes rise faster than projected or you outlive your actuarial life expectancy, the set-aside can be exhausted while you still owe. When funds run out, the servicer must notify you in writing within 30 days and recommend that you speak with a HUD-approved housing counselor.⁴ From that point, you are personally responsible for property charges again, and the same default consequences apply.

Choosing a Set-Aside Voluntarily

Even if your financial assessment does not require a LESA, you can elect one at closing. Federal regulations give borrowers who pass the assessment three choices for handling property charges:⁵

Self-pay, where you handle all property charges yourself.
A voluntary fully funded LESA, where the servicer pays your property charges directly, the same way it would for a mandatory LESA.
Servicer withholding, available on adjustable-rate HECMs only, where the lender withholds funds from your monthly payments or charges them against your line of credit to pay taxes and insurance.

Once you choose either of the two arrangements, you cannot cancel it. If you know you tend to let bills slip, or you simply want the payments handled automatically, electing one at closing may be worth the reduction in available funds.

Non-Borrowing Spouses Still Have to Pay the Taxes

When only one spouse is named as the borrower and that borrower dies, an eligible non-borrowing spouse can stay in the home under a deferral period. The tax bill, though, does not pause. To keep the deferral, the surviving spouse must continue to satisfy all of the borrower’s obligations under the loan documents, including property taxes and insurance, and must do it without receiving any disbursements from the HECM.⁷ A LESA that was paying the borrower’s taxes stops disbursing once the deferral begins.

If any deferral requirement stops being met, including payment of property charges, the deferral ends immediately and the full loan balance becomes due.⁸ Talk this through with a housing counselor before closing if you have a spouse who is not on the loan.

If You Are Already Behind: Loss Mitigation

Foreclosure is not always the immediate next step after a property tax default. HUD’s counseling guidelines direct counselors to contact the servicer and work through home retention options:⁹

A repayment plan, where the servicer lets you repay corporate advances (the funds the servicer spent on your delinquent taxes) over time instead of all at once.
Refinancing the defaulted HECM into a new HECM, depending on available equity and a new financial assessment.
An at-risk extension for borrowers over age 80 who have a critical health circumstance affecting themselves or a household member. Under rules that took effect April 29, 2024, the extension remains in place for as long as the borrower lives in the home, with no annual renewal.¹⁰

None of these are guaranteed. Servicers have to begin foreclosure within six months of a loan being called due, so the window for negotiation closes.⁶

The Non-Recourse Backstop

One piece of good news: a HECM is a non-recourse loan. The borrower has no personal liability for the balance. If the loan goes into default and the home is sold at foreclosure, the lender can only recover what the property brings. No deficiency judgment can be pursued against you or your estate.² Non-recourse does not stop the foreclosure; it limits the damage to the home itself.

Senior Property Tax Relief and a HECM-Specific Warning

Before deciding you cannot afford the taxes, check what your state or county offers older homeowners. Common programs include assessment freezes, tax deferrals, and homestead exemptions, with eligibility usually tied to age, income, and primary residence.

One caution specific to reverse mortgages: federal regulations prohibit HECM borrowers from taking part in real estate tax deferral programs, or from allowing any lien to be recorded against the property that is not subordinate to the HECM.² Deferral programs that place a lien on your home can conflict with your loan terms. Tax freezes and exemptions that only reduce the bill, without creating a lien, generally do not. Your local tax assessor or a HUD-approved housing counselor can tell you which programs in your area fit within those rules.

1
Consumer Financial Protection Bureau. If I Take Out a Reverse Mortgage Loan, Does the Lender Own My Home?
2
eCFR. 24 CFR 206.27 – Mortgage Provisions
3
U.S. Department of Housing and Urban Development. HECM Adjustable Rate Mortgage Model
4
eCFR. 24 CFR 206.205 – Property Charges
5
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
6
eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property
7
U.S. Department of Housing and Urban Development. Mortgagee Letter 2015-15
8
U.S. Department of Housing and Urban Development. Mortgagee Letter 2014-07
9
U.S. Department of Housing and Urban Development. HUD Housing Counseling Guidelines for HECM Borrowers with Delinquent Property Charges
10
Administration for Community Living. New Protections for Older Homeowners with HECM Reverse Mortgages