Underscoring the confusion that continues to surround tax and insurance issue with reverse mortgages is the recent case of a Michigan couple who found themselves in default due to unpaid property taxes and no property insurance in place.
Despite later obtaining insurance, the couple’s default had produced a demand from the lender, Financial Freedom, for repayment of the loan balance, amounting to $30,000. Though the lender offered to take monthly installments of $2,800, that sum was beyond the couple’s means.
After a third-party intervened, Financial Freedom reduced the monthly repayment to $750 for property taxes owed, with the proviso that the homeowners stay current on future taxes owed and agree to maintain property insurance.
A company spokesman said there is “no real data on [the frequency] of these situations,” adding that such arrears scenarios automatically trigger default notifications and “then there are discussions to figure out something that will work out for the borrower.” Further complicating matters, he noted, is that “tax collectors are a big player in this. They have to be asked for some relief [as well].” Financial Freedom, he reported, currently is working on new reverse mortgage educational pieces with a section that talks about tax defaults and best practices – an apparent effort to reduce and/or head off similar occurrences in the future.
Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]
