HOA Fees and Reverse Mortgages: Delinquency, Assessments, and Heirs

If you have a reverse mortgage, you still have to pay your HOA fees, every month or quarter, for as long as the loan is in place. Federal rules classify homeowners association dues as a mandatory property charge under a Home Equity Conversion Mortgage (HECM), and unlike property taxes and insurance, HOA fees cannot be paid through a lender-managed set-aside.¹ Miss enough of them and the entire loan balance can be called due and payable, the same consequence as letting your homeowners insurance lapse.²

Why HOA Dues Stay on Your Plate

Federal regulations define property charges broadly to include property taxes, hazard insurance, flood insurance, ground rents, condominium fees, and homeowners association fees.² But the rules split those charges into two groups. Taxes and insurance can flow through a lender-managed account. HOA fees, condo fees, and ground rents sit in a separate category the borrower must pay directly, on time, without lender assistance.¹

This surprises borrowers who assume that eliminating a monthly mortgage payment eliminates most housing costs. It doesn’t. HOA dues, property taxes, insurance, and maintenance all continue for as long as you live in the home, and the reverse mortgage contract makes paying the HOA an enforceable obligation. Skip your dues and you have breached the loan terms, even though there is no monthly mortgage payment to miss.

The Life Expectancy Set-Aside Won’t Cover HOA Fees

During underwriting, the lender runs a financial assessment that looks at your credit history, payment record, and residual income. If that assessment raises concerns, the lender carves out part of your loan proceeds into a Life Expectancy Set-Aside, or LESA, to cover certain property charges automatically.³ The calculation uses life expectancy tables and projects the cost of covered charges over your remaining lifespan.

Here is the trap: HUD guidance states that the set-aside “will be used for the sole purpose of paying taxes and hazard and flood insurance premiums.”³ HOA dues, condo fees, and ground rents are excluded. You pay those yourself, from your income or savings, for the life of the loan.

A fully-funded LESA is required when the borrower has a poor credit or property charge payment history. The lender pays covered charges directly from that account. A partially-funded LESA applies when credit is solid but residual income falls short of HUD’s thresholds; in that case, you receive semi-annual payments to supplement income but remain responsible for paying property charges yourself.³ Either way, HOA fees stay outside the arrangement.

If LESA Funds Run Out

A LESA can be exhausted before you die, particularly if taxes or premiums climb faster than projected. The lender must review the set-aside annually and notify you within 15 days if funds fall short. From that point, you pay taxes and insurance out of pocket too, on top of the HOA fees you were already covering.¹ On adjustable-rate HECMs, the servicer may draw from any remaining principal limit to cover a missed charge and add it to the loan balance. On fixed-rate HECMs, there is no remaining principal limit; if the LESA dries up and you can’t pay, the loan becomes due and payable.

What Happens if You Fall Behind on Dues

Missing HOA payments puts the loan into what the industry calls a technical default. Once the servicer identifies the delinquency, you receive a letter giving you 30 days to resolve the unpaid balance. If you can’t cure it within that window, HUD can approve the lender to declare the full loan balance due and payable.²

In practice, servicers often pay delinquent HOA fees themselves as a corporate advance. They do it to protect their lien position, not as a favor. An HOA with a growing unpaid balance has its own collection tools, including the right to file a lien and, in some states, to foreclose on a priority claim that can wipe out the lender’s interest. When the servicer pays your HOA bill, the amount is added to your loan balance along with administrative fees and interest, which shrinks your remaining equity every time it happens.

Once a loan is declared due and payable, the servicer sends a formal notice and refers the case to foreclosure if the borrower doesn’t respond within 30 days. The process ends with the borrower losing the home, regardless of age or health.

Loss Mitigation Is Narrower for HOA Debt

When a HECM borrower defaults on property charges, the servicer has a few tools before foreclosure: helping the borrower refinance into a new HECM, connecting them with local assistance programs, or offering a repayment plan for the servicer’s corporate advances. There is a real gap, though. HUD excludes outstanding HOA fees from repayment plans.⁴ Fall behind on property taxes and you may get up to 60 months of installments capped at 25 percent of monthly surplus income. Fall behind on HOA dues and that option doesn’t exist. The path to cure is essentially refinancing into a new HECM if you still qualify, or finding the money elsewhere.

Borrowers at least 80 years old who face critical health circumstances such as terminal illness or long-term disability can have the servicer request a foreclosure timeline extension from HUD. That buys time but doesn’t erase the debt. Outside that narrow exception, the clock moves quickly.

Special Assessments Are Your Problem Too

Regular monthly or quarterly dues are predictable. Special assessments are not. When your HOA levies a one-time charge for a new roof, elevator, or repaving project, that bill is your responsibility as the property owner under the same property-charge rule.¹

The LESA rules allow set-aside funds to cover special assessments levied by municipalities or under state law, such as a street improvement assessment from local government. An HOA special assessment for a building repair is a private community obligation, so it falls outside LESA coverage.³ A surprise five-figure assessment from your HOA lands entirely on you, and if you can’t pay, the servicer may advance the money and add it to your loan balance.

In a Condo, Your HOA’s Finances Matter

Condominium borrowers face an extra layer. The condo project itself must be FHA-approved for a HECM to exist there, and the HOA’s financial health is central to that approval. FHA reviews the association’s current-year budget, two years of income and expense statements, a current balance sheet, and a reserve study.⁵

Two numbers carry the most weight. First, replacement reserves must be adequate; when a project seeks reduced owner-occupancy thresholds (as low as 35 percent for established developments), FHA requires reserves of at least 20 percent of the budget.⁶ Second, no more than 10 percent of units can be more than 60 days delinquent on dues. Enough non-paying neighbors and the whole project can lose FHA eligibility, which means no new HECMs in the building. Existing loans aren’t immediately affected, but anyone counting on refinancing into a new reverse mortgage later may find that option closed.

What Heirs Deal With

When the last surviving borrower dies, the loan becomes due and payable. Heirs receive a notice and have 30 days to decide whether to keep the home, sell it, or turn it over to the lender, with that initial window extendable up to six months to arrange a sale or financing.⁷

HECMs are non-recourse: the lender collects only from the sale of the property, not from other assets or from heirs personally.² If the home is worth less than the total loan balance, heirs can satisfy the debt by selling for at least 95 percent of appraised value, with FHA insurance covering the shortfall.⁷

That non-recourse protection covers the mortgage debt. HOA fees that accrue after the borrower’s death and before the property changes hands are a separate obligation tied to the property, and the HOA can file a lien for those post-death assessments. Anyone inheriting a condo with a reverse mortgage should check the HOA account immediately, because months of unpaid dues plus late fees can add up quickly and reduce the net proceeds from a sale.

Extended Absences Don’t Pause the Bill

A HECM requires the home to be your principal residence. If you move to a healthcare facility, the property still counts as your principal residence as long as the absence doesn’t exceed 12 consecutive months; go past that with no other borrower in the home and the loan becomes due and payable.²

During that 12-month window, you still owe HOA fees. Your unit remains part of the association whether or not anyone is living in it. If the HOA restricts rentals you generally can’t offset the cost by leasing the unit, and leasing at all would raise questions about whether the property is still your principal residence. Anyone facing a possible long-term care move should plan for HOA costs to keep running even if the home sits empty.

Use Counseling and Annual Certification to Stay Ahead

Before closing, federal law requires HECM counseling with a HUD-approved agency. The counselor must explain the loan terms, your ongoing obligations (including HOA fees), and the alternatives. Both the borrower and any non-borrowing spouse must attend, and the lender cannot proceed without the physical counseling certificate.⁸ Use that session to walk through the actual math for your property: HOA dues plus taxes, insurance, and maintenance against the income you’ll have after closing. If the numbers are tight, the financial assessment may require a LESA for taxes and insurance, and you will still need to cover the HOA every month on your own.

Once the loan is active, the servicer checks in at least once per calendar year. You confirm contact information and certify that the property is still your principal residence, with a separate certification for any eligible non-borrowing spouse.² Borrowers who pay property charges directly must also provide evidence of payment as required by the mortgage.¹ Because HOA fees always fall outside the LESA, expect to document that your dues are current. Keep copies of receipts or cleared checks. Ignoring the annual certification or failing to produce payment evidence gives the servicer reason to look harder, and if delinquencies surface, to start the default process.

1
eCFR. 24 CFR 206.205 – Property Charges
2
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
3
U.S. Department of Housing and Urban Development. Mortgagee Letter 2013-28 – HECM Financial Assessment and Property Charge Guide
4
U.S. Department of Housing and Urban Development. Mortgagee Letter 2015-11 – HECM Loss Mitigation Options
5
U.S. Department of Housing and Urban Development. FHA Condominium Project Approval Required Documentation List
6
U.S. Department of Housing and Urban Development. FHA to Lower Owner-Occupancy Requirement for Condominiums
7
Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die
8
eCFR. 24 CFR 206.41 – Counseling