A reverse mortgage does not require monthly payments, so many borrowers are surprised to learn it can still end in foreclosure. In California, reverse mortgage foreclosure while the borrower is alive usually starts with unpaid property taxes or homeowners insurance, a lapse in occupancy, or a home that is not kept in repair. Most of these defaults can be cured if you act early.
If you or a parent has received a default or "due and payable" letter from a reverse mortgage servicer, call (415) 754-0115 to schedule a free consultation, or write to us through the contact page.
What borrowers still owe under a reverse mortgage
Most reverse mortgages are federally insured Home Equity Conversion Mortgages (HECMs). The loan balance grows over time instead of shrinking, and it is not due until a triggering event. While you live in the home, your obligations are ongoing:
- Pay property taxes on time.
- Keep homeowners insurance (and flood insurance, if required) in force.
- Pay any HOA dues or other property charges.
- Live in the home as your principal residence and return the annual occupancy certification.
- Keep the home in reasonable repair.
How a default leads to reverse mortgage foreclosure in California
Property charge defaults
When taxes or insurance go unpaid, the servicer usually pays them to protect its lien and adds that amount to your loan balance. That payment by the servicer is what creates the default. The servicer will then ask you to repay it, and if you cannot, it can seek HUD's approval to call the loan due.
Occupancy defaults
If the servicer does not receive the yearly occupancy certification, or believes you have moved out, it may treat the home as no longer your principal residence. A stay of more than 12 consecutive months in a care facility for health reasons also generally counts as moving out.
A paperwork default is often the easiest to fix
Many occupancy "defaults" are really missed mail. Returning the certification with proof that you live there, such as utility bills or a driver's license at the address, can resolve it quickly.
Repair defaults
Serious deterioration can be a default. Servicers may inspect and ask for repairs within a set time.
The foreclosure itself
If a default is not cured, the servicer can call the loan due and, after the required notices, pursue the same non-judicial trustee sale process used for other deeds of trust in California, with a notice of default, a waiting period and a notice of sale.
Options to cure a default before a sale
Repay the advanced amount
If family help or savings can cover what the servicer paid for taxes or insurance, repaying it usually ends the default.
A repayment plan
HUD rules allow servicers to offer repayment plans for property charge defaults, spreading what was advanced over a period that fits your budget. Ask for one in writing and keep current on new taxes and insurance while you repay.
Extensions for older or seriously ill borrowers
HUD guidance has allowed servicers to delay calling a loan due for some older borrowers facing critical circumstances, such as a terminal illness or long-term disability. Eligibility is specific, so ask the servicer and document your situation.
Protection for a non-borrowing spouse
If a spouse was not on the loan, federal rules may allow that spouse to stay in the home after the borrower's death or move to care, if certain conditions are met. Keep the paperwork that names them.
Bankruptcy as a pause
Filing bankruptcy triggers the automatic stay and stops a pending trustee sale while the case is open. In some situations, a Chapter 13 plan may be used to repay amounts the servicer advanced over time. Whether that works depends on your income and the details of the loan. Our overview of whether bankruptcy can stop foreclosure explains the basics.
Get every figure in writing
Ask the servicer for an itemized list of what it advanced, when, and for which tax installment or insurance policy. Compare it with the county tax records and your insurer's statements. Advances are sometimes duplicated, or made for a policy you already paid directly, and a correction can shrink or eliminate the default. Request any repayment plan or extension in writing, and keep the servicer's written answer. Pay current taxes and insurance directly while any dispute is sorted out.
If keeping the home is not realistic
HECMs are non-recourse: you are generally not personally responsible for any gap between the loan balance and the home's value. Selling the home, even for less than the balance under HUD's rules, or offering a deed in lieu may protect remaining equity or at least avoid a public auction. The tradeoffs are similar to those in short sale vs foreclosure.
How The Somal Law Firm can help
Attorney Bob Somal represents homeowners and families in Pleasanton, Livermore, Dublin, San Ramon, Danville and across the East Bay in foreclosure defense and mortgage disputes. For reverse mortgage problems, that can mean confirming what the servicer actually advanced, pressing for a repayment plan or extension, correcting occupancy records, and responding to recorded foreclosure notices within California's deadlines. Call (415) 754-0115 to schedule a free consultation.
Frequently asked questions
Can a reverse mortgage lender foreclose while I still live there?
Yes, if a default such as unpaid taxes or insurance is not cured. Living in the home does not by itself prevent foreclosure.
Will I owe money if the home sells for less than the loan?
For a HECM, generally not. The loan is non-recourse, and FHA insurance covers the shortfall.
What should I do first after a default letter?
Read what the servicer says you owe or failed to do, gather tax and insurance records, and get advice before the response deadline.
Reverse mortgage defaults usually move slowly at first and then quickly. Call (415) 754-0115 to schedule a free consultation with Bob Somal, and bring the servicer's letters, your property tax bills and your insurance declarations. You can also use our contact form, and family members are welcome to reach out on a borrower's behalf with their permission.
Attorney Advertising. This article is general legal information for Bay Area residents, not legal advice, and does not create an attorney–client relationship. Every situation is different — please consult a licensed attorney about your specific circumstances.