Reverse Mortgage Foreclosure: Defenses for Seniors and Surviving Spouses

Reverse mortgage foreclosures — particularly on HECM (Home Equity Conversion Mortgage) loans insured by the FHA — have been increasing dramatically. The National Reverse Mortgage Lenders Association reports that approximately 18% of HECM loans are currently in technical default, meaning the borrower is behind on property taxes or homeowners insurance even though no mortgage payment is required. When these obligations go unmet, the lender can call the loan due — demanding full repayment — and foreclose if the senior homeowner cannot pay. The tragedy is that many of these foreclosures are preventable, and some are outright illegal under HUD rules designed to protect senior homeowners and surviving spouses.

The HECM foreclosure process differs fundamentally from a traditional mortgage foreclosure because there is no monthly payment obligation — the loan is repaid when the borrower dies, sells, or permanently moves out. Default on a HECM loan occurs when the borrower fails to: (1) pay property taxes, (2) maintain hazard insurance, (3) maintain the property in reasonable condition, or (4) occupy the property as the primary residence. These are called 'non-monetary defaults' — the borrower hasn't defaulted by failing to make payments, but rather by failing to meet ongoing obligations. HUD Mortgagee Letter 2015-11 and subsequent letters require servicers to take specific loss mitigation steps before foreclosing on these defaults.

For surviving spouses, HUD rules have evolved significantly since 2014 to protect what is called the 'non-borrowing spouse.' Before 2014, when the borrowing spouse died, the reverse mortgage became due and payable immediately — and the non-borrowing surviving spouse (typically a widow) faced eviction. HUD Mortgagee Letter 2014-07 and subsequent rulemaking (codified at 24 CFR § 206.55) changed this: a non-borrowing spouse can remain in the home after the borrowing spouse dies, as long as they: (1) were married to the borrower at the time of loan origination, (2) are identified in the HECM loan documents, (3) continue to occupy the property as their principal residence, and (4) continue to pay property taxes and insurance. The loan does not become due and payable during the non-borrowing spouse's lifetime as long as these conditions are met. This is a lifetime protection — not temporary.

When a HECM borrower defaults on taxes or insurance, HUD requires the servicer to follow a loss mitigation hierarchy before foreclosing. Under HUD Mortgagee Letter 2024-04, the servicer must: (1) attempt to contact the borrower within 30 days of the default to discuss options, (2) offer a repayment plan to cure the default over time (up to 60 months for tax defaults), (3) offer a deferral of the defaulted amounts (effectively lending the borrower the money to pay taxes/insurance with the advance added to the loan balance), and (4) if the borrower cannot afford even a repayment plan, evaluate them for a HECM loss mitigation 'at-risk' extension — effectively a forbearance where the servicer advances the defaulted obligations and adds them to the loan balance. Foreclosure can only proceed after the servicer has exhausted these options.

The CFPB and HUD have been actively investigating improper reverse mortgage foreclosures. In 2024-2025, settlements were reached with several major HECM servicers over allegations of: foreclosing without offering required loss mitigation, foreclosing on surviving spouses protected by the non-borrowing spouse rule, improperly calculating occupancy status, and failing to properly notify borrowers of available options. If you or a family member are facing HECM foreclosure, one of the first things to check is whether the servicer has complied with HUD's loss mitigation requirements. Many HECM foreclosures are defective for exactly this reason.

Property charge loss mitigation — the program for tax and insurance defaults — is particularly important. Under the HECM program, the servicer can advance funds to pay delinquent taxes or insurance premiums and add these amounts to the loan balance (the 'line of credit' approach). For borrowers with equity remaining in the home, this is usually the best option. Even for borrowers with limited equity, a repayment plan can often make the obligation manageable. The key is that the servicer MUST offer and evaluate these options — the senior homeowner should not have to know about them to receive them. In practice, however, many servicers do not proactively offer loss mitigation, and seniors must request it in writing.

For adult children and caregivers: if your parent has a HECM reverse mortgage and is behind on taxes or insurance, you have more power to help than you think. First, determine if your parent's loan is HECM (FHA-insured) or proprietary (private). If HECM, HUD rules apply and the protections described above are mandatory. Call the servicer with your parent (or with a power of attorney) and request HECM loss mitigation. Specifically ask for a 'repayment plan for property charges' or a 'property charge loss mitigation evaluation.' Send the request in writing. Contact a HUD-approved housing counselor — they are trained in HECM loss mitigation and can help navigate the process at no cost. If the servicer refuses or claims no options exist, file a complaint with the CFPB and HUD's FHA Resource Center (800-CALL-FHA).

At Professional Law Assist, we have experience defending HECM foreclosures across multiple states. We identify whether the servicer has complied with HUD loss mitigation requirements, whether any surviving spouse protections apply, and whether the claimed default (taxes, insurance, occupancy) is valid. Facing foreclosure on a reverse mortgage is terrifying — but seniors have more legal protections than they are usually told. Contact us for a free case review.