As a reverse mortgage borrower, you know, that although you don’t have to make monthly mortgage payments, you are still responsible for the maintenance of your home and the payment of property taxes and homeowners insurance on it.
If you fail to meet these loan obligations, your lender or loan servicer can legally call your loan “due and payable,” meaning your home may be in default and foreclosed upon. This is the same for homeowners with a traditional mortgage. But if you were one of the more than 23 million people laid off or furloughed during the peak of the COVID-19 pandemic, having enough money to pay your property taxes might have gone out the window right along with the cable bill and gym membership.
If you have a LESA (Life Expectancy Set-Aside) that automatically pays your property taxes and homeowners insurance for you, you can look back on that decision, whether it was your decision or your lender’s requirement, as a blessing.
But if you don’t have a LESA, and it appears you’re going to be late on your property taxes and homeowners insurance, you need to act quickly. While many lenders or servicers, under CARES Act guidance, suspended mortgage payments for millions of home borrowers through forbearance and other mortgage relief programs, the suspension of paying property taxes is beyond their power or authority.
Typically, property taxes for the running of schools, the maintenance of streetlights, local government salaries, and so forth, are paid to the county or other local jurisdiction. Each county may make its own rules regarding the collection of property taxes, and in a state like Texas with 250 counties, that can be a lot of different rules.
During COVID, many counties were reluctant or didn’t have the authority to grant property tax payment extensions to homeowners even if they wanted. County tax collectors, however, may have the authority to waive late-payment penalties in some circumstances.
So, even if your monthly mortgage payments aren’t an issue for you — you’re not obligated to make them if you have a reverse mortgage, or if you have a traditional mortgage and your lender or servicer has provided you temporary mortgage relief with a forbearance, modification or other program — you still need to be crystal clear about your obligation to pay property tax, homeowners insurance and home maintenance costs.
What To Do
Fortunately, there is some guidance and assistance available provided by the CARES Act and the U.S. Department of Housing and Urban Development (HUD). The operative word here is “some,” because many rules and guidelines have been applied on the fly or as stopgap measures because the length and the severity of the pandemic have been so unpredictable. Indeed, currently, there has been an uptick in COVID-19-related measures with the emergence of new variants of the virus.
For your financial protection, if you haven’t already, you should consider asking your loan servicer to delay calling your loan due and payable if you are late or are going to be late on the payment of your property taxes. For approved extension requests received between July 1, 2021 and September 30, 2021, servicers must grant homeowners an extension of up to six months.
Similarly, for HECM homeowners with loans that have already been called due and payable, servicers must approve homeowner requests for an extension for any deadline related to foreclosure and claim submission of up to six months when the request is received between July 1, 2021, and September 30, 2021.
If you’re a HECM homeowner who has already received an extension between July 1, 2020, and September 30, 2020, the FHA is providing one additional three-month extension period if needed, when the homeowner requests this extension from their mortgage servicer.
Government programs are subject to change and to interpretation, so be sure to visit the appropriate government website for updated information before acting on any advice listed here.
Typically, you do not need to provide any documentation to your lender or loan servicer to receive an extension. During the extension period, your lender or loan servicer cannot charge any late fees and penalties. However, please note that any missed payments are not forgiven, just delayed. These programs do not reduce the need to meet financial obligations – they just buy you more time to do so. As of the publication date of this article, no extension runs beyond June 30, 2022.
To protect yourself financially:
- Be aware of all CARES/HUD mortgage relief measures, including extensions,
- Inform your lender of your current financial and housing situation, and
- Stay in touch with your county tax assessor’s office about their property tax deadlines and penalty policies. While your lender or servicer cannot charge any late fees and penalties on your mortgage during your CARES extension, your county is not under any similar obligation with respect to property taxes.
Lastly, if you have a reverse mortgage, you might speak to your lender about refinancing it. Given how property values may have soared across the country, you now might have a lot more home equity than you once did, which you could convert into cash for almost any use. And if you’re 62 or older and have never considered a reverse mortgage, now might be a good time to do so.
We hope this article has given you some help with things to think about. Of course, every situation is different. This information is intended to be general and educational in nature and should not be construed as financial advice.