Mortgage Q.&A.: Seniors with reverse mortgage still have to pay taxes, insurance

Q.: I've heard some senior citizens are losing their homes to foreclosure even though they took out a reverse mortgage. Is this true?

A.: Reverse mortgage borrowers never have to worry about making loan payments.

But a growing number of seniors are putting themselves at risk of losing their homes because they're forgetting -- or unable -- to pay property taxes and homeowners insurance.

If you have a reverse mortgage, you should know that reverse mortgage loan servicers typically don't escrow funds for tax and insurance payments; those payments are your responsibility.

However, if you fail to make those payments, "the loan is deemed to be out of compliance with the provisions of the mortgage and FHA considers the loan to be delinquent," according to the Federal Housing Administration.

Lenders are then required to work with you to try to bring the loan current as soon as possible, by putting you on a payment plan, for example. While foreclosure is the last resort, "lenders may have no choice if these defaults are not cured," the FHA warns.

Q: Are mortgage lenders or the government doing anything to help people keep their homes?

A: It's unclear how many reverse mortgage borrowers have slid into default on their loans for failure to make tax and insurance payments, but government and industry officials agree the number is growing.

The FHA is taking action to ensure more loans don't go into default and seniors don't lose their homes.

If you apply for a reverse mortgage, you are already required to go through mandatory pre-closing counseling; that counseling will now place a greater emphasis on how important it is that you fulfill all the terms of your reverse mortgage, including making tax and insurance payments.

In addition, other changes to FHA's Home Equity Conversion Mortgage program are likely, including requiring lenders to escrow for T&I payments and verifying that borrowers can afford to make those payments.