After the loan closes, a loan “Servicer“ manages the account and is responsible for disbursing monthly payments to the homeowner (if this payment option is chosen), advancing funds from the line of credit upon request, collecting any voluntary repayments and sending periodic statements.
Servicers have also implemented safety nets that are intended to prevent borrower fraud, identity theft or outside parties taking undue advantage of borrowers.
A reverse mortgage borrower is responsible for staying current on property taxes, homeowner’s insurance and homeowners association dues (if applicable). These are commonly referred to as “mandatory obligations.” You can pay them yourself or establish a set-aside account and have the Servicer pay them for you.
The Servicer has internal systems in place to inform and alert you if there are any tax and/or insurance issues with your loan and will notify you promptly if you fall behind on either responsibility.
If you fail to pay your taxes and insurance, the Servicer will use whatever funds are left in your account to pay them. If there are no funds, the Servicer must pay them on your behalf. When this happens, your loan will be placed into a “technical default” status and your account frozen.
The Servicer will devise a repayment plan so that you can bring your accounts current once more, however, if you don’t have enough income to make this possible, then the Servicer will have no other choice but to request that HUD deem the loan due and payable. Additional counseling is available to those who find themselves in default. Your Servicer will help you find a counselor. A counselor will work with you to try to set up an acceptable repayment plan.