Fox Business Outlines Reverse Mortgage Tax and Insurance Default Dangers

NewImageA 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.

Advertisement

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

Join the Conversation (7)

see all

This is a professional community. Please use discretion when posting a comment.

  • The article was so so.  Per the Fox Business article, the article was taken from insurance.com.
     
    As stated above, the following is very false:  “Since reverse mortgages don’t automatically set aside funds for T&I in an escrow account, as is done for forward mortgages….”  Impounds are taken from monthly payments to the lender and are not always required.  Sometimes we really get confused about forward mortgages.

    It is odd that “Russell Rothstein, reverse mortgage division manager for Graystone Mortgage in Rockville, Md,” felt free to say:  “…Reverse Mortgage Insight magazine reports that approximately 5% of all reverse mortgage borrowers currently are delinquent on property taxes, home insurance or both.”

    The article only focused on taxes and insurance defaults.  It failed to mention homeowner association dues or assessments or the basic requirement to maintain the home in structurally sound condition.  It seems the press is still failing to discuss borrower responsibilities fully or completely.
     

    • We never spoke with Fox Business, and I’m not sure who Russell Rothstein is.  We publish online newsletters, but have never published a magazine.  I don’t believe we’ve cited our T&I estimates in our newsletter, as they’re part of our subscriber reports.

      Of course, they also called our firm by the wrong name, so it appears to be pretty lazy reporting all the way around.  I’ve never been in the media industry, but I thought fact checking was part of the editorial process?

    • peterhamilton,
       
      In that regard, the industry allows our detractors to walk all over us without response. 
       
      However, as seniors age things happen.  In regard to function, they are not always the same people we provided loans to.  Dementia sets in, strokes occur, mobility drops, finances run out, outside support dwindles as need grows, and on and on.
       
      In some cases, after one bill goes by and foreclosure looks like a toothless tiger why not avoid payment of the next and the next especially if the house is under water?  These are called strategic defaults.
       
      It is ridiculous servicers have been so tolerant. Now that all these defaults have been permitted to build like water behind a dam which breaks when foreclosures begin to occur it will feel like a flood.  Our decisions about defaults have not been wise ones.  Oh yeah, I forgot we can always make HUD the fall guy just like Wells.

    • peterhamilton,
       
      In that regard, the industry allows our detractors to walk all over us without response. 
       
      However, as seniors age things happen.  In regard to function, they are not always the same people we provided loans to.  Dementia sets in, strokes occur, mobility drops, finances run out, outside support dwindles as need grows, and on and on.
       
      In some cases, after one bill goes by and foreclosure looks like a toothless tiger why not avoid payment of the next and the next especially if the house is under water?  These are called strategic defaults.
       
      It is ridiculous servicers have been so tolerant. Now that all these defaults have been permitted to build like water behind a dam which breaks when foreclosures begin to occur it will feel like a flood.  Our decisions about defaults have not been wise ones.  Oh yeah, I forgot we can always make HUD the fall guy just like Wells.

  • The problem is no on tells the elderly borrower they are solely responsible for understanding the consequences of a reverse mortgage for their financial, personal and health situation, and long term need.  The borrower must have a financial plan for the future to ensure a reverse mortgage is beneficial so they know where the money will come from for living expenses, health expenses in addition to the required expenses of a reverse mortgage.  It is ridiculous to say it is a matter of forgetting to pay such things and hints 30,000 seniors in default for non-payment of taxes are stupid. It is sad the new financial assessment proposal once again is a protection for the lender and HUD.  When I wonder will there ever be protection for the seniors and liability for the lenders and HUD for making loans that harm borrowers?

  • what person who owns a home , doesnt know they have to pay taxes and insurance… Many of these reverses where free and clear homes prior , so the senior knows they have to be paid..
    Why is it when your become a senior , everyone starts treating them like they become stupid also !

string(117) "https://reversemortgagedaily.com/2011/08/15/fox-business-outlines-reverse-mortgage-tax-and-insurance-default-dangers/"

Share your opinion

[wpli_login_link redirect="https://reversemortgagedaily.com/2011/08/15/fox-business-outlines-reverse-mortgage-tax-and-insurance-default-dangers/"]