The landscape has changed in the HECM business: Complex servicing compliance issues are being enforced by the CFPB; internal and external auditors may require both positive and negative tax verification reporting; and a heightened sensitivity has arisen regarding the ability of senior homeowners to meet the obligations of the reverse mortgage program. Because of all this, now is the time to consider changing the way you handle your annual non-escrow delinquency searches for unpaid property taxes.

Historically, property tax delinquency searches were done (and often still are) on an annual basis only. Once a delinquent property tax was determined, the follow-up correspondence was rather harsh and, more often than not, misunderstood by elderly homeowners. This environment has created a disconnect between the servicing department and their customers, increasing incoming calls to a lender’s call center and adding undue stress to its workplace.

In today’s climate, I recommend a more proactive approach. Consider moving to a monthly delinquency search that would enable your servicing staff to monitor the nonpayment of property taxes on a more consistent basis and allow them to strengthen their connection with their borrowers.

Many states allow deferred taxes or installment plans for senior homeowners. The taxes are usually shown as unpaid, even though that is not exactly the case. Conducting a simple annual search with an immediate delinquent letter will surely lend itself to a rather strong and negative reaction from the homeowner. Who needs those headaches? There are reliable and trustworthy tax service vendors that will perform these monthly searches and provide specific codes on reports that indicate when a homeowner is participating in a deferral or installment program. Along with these monthly tax record reports, you could consider launching a letter campaign that begins with an initial friendly reminder of the homeowner’s responsibility—or, even better, a friendly phone call to see how your customer is doing, both financially and otherwise.

Sure, there is a cost associated with knowing the status of outstanding taxes. But what is the cost of not knowing? What are the potential repercussions of not knowing that a delinquency even exists, not knowing what the next critical event dates are in that particular jurisdiction, or not knowing that your borrower is deferring their taxes and still taking equity out of their house?

After several phone calls to check on the payment status of outstanding taxes, the collector is going to know you are interested in making sure that the taxes are paid. If you nurture that relationship, the collector may become your best ally when it comes to protecting the lien position on your collateral.

Considering the intense scrutiny lenders now face, it is more critical than ever that reverse mortgage providers do due diligence when it comes to their client’s tax payments. By closely monitoring the situation and staying ahead of the curve, lenders can help ensure that their borrowers have a satisfying loan experience.