In recent years HOA boards have been faced with a “new” type of collection issue, the reverse mortgage. Even though reverse mortgages have been around since 1961, how they actually work is not well understood as a traditional mortgage.
A reverse mortgage is a loan available to homeowners who are at least 62 years old and have equity in their home. This type of loan allows the borrower the ability to convert part of their home equity into cash. This type of loan was developed as a way for retirees, with limited income, to monetize the equity that has built up in their homes for basic living expenses or to pay for health care. Even so, there are no use restrictions on how reverse mortgage proceeds are to be spent by the borrower.
Basically, this type of loan is referred to as a reverse mortgage because instead of the borrower making monthly mortgage payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower. The loan only has to be paid back when the borrower sells the home or permanently vacates the home. Generally speaking, the borrower does not have to make any loan payments as long as the home is the primary residence of the borrower. All related real estate expenses such as property taxes, homeowners insurance, and HOA dues must be kept current by the borrower.
Questions arise regarding HOA collection efforts when it comes to members’ homes that have reverse mortgages. Fortunately, no matter what particular mortgage or lien that is attached to a member’s home, the HOA retains collection remedies for delinquent homeowner assessments.
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