A recent Fox Business article points to the foreclosure risk reverse mortgage borrowers may face if they fail to meet their tax and insurance payments.
Since reverse mortgages don’t automatically set aside funds for T&I in an escrow account, as is done for forward mortgages, it can be “easy to forget” to make these payments, Fox says.
Although borrowers have the option of setting aside funds for T&I, fewer than 2% actually do so, Steve Irwin, executive vice president of the National Reverse Mortgage Lenders Association (NRMLA), told Fox Business News.
The percentage is so small because people aren’t willing to receive a lesser amount from their reverse mortgage, says Irwin.
Additionally, he says, “it can be difficult to determine how much to set aside since no one knows exactly how long the reverse mortgage will be in place.”
Although definitive data is not available, Fox cites a Reverse Market Insight estimate that approximately 5% of reverse mortgage borrowers are delinquent on T&I payments.
The article details the necessity of homeowners’ insurance, and what could happen if a borrower doesn’t keep insurance current, including the U.S. Department of Housing and Urban Development’s lender guidelines for foreclosing on delinquent reverse mortgage borrowers.
Read the Fox news article here.
Written by Alyssa Gerace