source:
  type: guide
  id: hud-4000-1-iii-c-defaults-for-unpaid-property-charges
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — c. Defaults
    for Unpaid Property Charges (11/30/2023)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — c. Defaults
    for Unpaid Property Charges (11/30/2023).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-c-defaults-for-unpaid-property-charges-full
  canonical_id: hud-4000-1-iii-c-defaults-for-unpaid-property-charges-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — c. Defaults
    for Unpaid Property Charges (11/30/2023)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — c. Defaults
      for Unpaid Property Charges (11/30/2023)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. Defaults for Unpaid Property Charges (11/30/2023) i. Definition
      HECM Loss Mitigation refers to strategies intended to minimize economic impact
      to the Mutual Mortgage Insurance Fund (MMIF) and to avoid foreclosure, if possible.
      Repayment Plan refers to a written agreement by the Borrower to make monthly
      payments to the Mortgagee to reimburse the Mortgagee for corporate advances
      made on the Borrower’s behalf for taxes and/or insurance. ii. Standard (A) HECMs
      in Default due to Unpaid Property Charges The Mortgagee may make property charge
      payments on behalf of the Borrower using funds available under the NPL. (1)
      When Insufficient Funds Remain If insufficient funds remain to satisfy these
      unpaid Property Charges, the Mortgagee must promptly notify the Borrower that
      failure to make the payment within 30 Days of the payment due date will result
      in the HECM becoming Due and Payable. III. SERVICING AND LOSS MITIGATION B.
      Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook
      4000.1 1494 Last Revised: 11/26/2025 If the Borrower does not make the required
      payment and provide the Mortgagee documentation of such, the Mortgagee must:
      • advance its corporate funds to pay the outstanding Property Charges; • take
      whatever steps necessary to protect its and HUD’s security interests; and •
      submit a Due and Payable request. (2) When There is a Deferral Period During
      a Deferral Period, the Mortgagee must not make property charge payments using
      HECM proceeds as no further Disbursements are available under the HECM. If a
      property charge payment is missed during a Deferral Period, the Mortgagee must
      notify any Eligible NBS that an obligation of the HECM was not satisfied and
      that the Deferral Period has ended unless the default is cured within 30 Days.
      If the default is not cured within such time, the Mortgagee must proceed in
      accordance with applicable time frames to initiate foreclosure and reasonable
      diligence in prosecuting foreclosure. If a default is cured at any time prior
      to a foreclosure sale, the Mortgagee must reinstate the Deferral Period provided
      the Deferral Period reinstatement provisions for an Eligible NBS are met. (3)
      HECMs with Set-Aside Accounts For HECMs with Set-Aside accounts for paying Property
      Charges, the HECM will be considered in default and eligible for Due and Payable
      status if: • the Set-Aside account has been exhausted of available funds to
      make property charge payments; • the Borrower fails to remit the property charge
      payment in full within 30 Days as required, after being notified by the Mortgagee
      of their outstanding property charge obligation; and • the Principal Limit has
      been exhausted, requiring the Mortgagee to make the property charge payment
      using corporate funds. (B) Notification to the Borrower of a Missed Property
      Charge Payment The Mortgagee must provide the Borrower a Property Charge Delinquency
      letter within 30 Days of the Mortgagee receiving notification that a property
      charge payment is outstanding when the Borrower has failed to make the required
      payment and provide the Mortgagee documentation of such payment. The Mortgagee
      may vary the actual structure of the letter, but must include the following:
      • state that an obligation of the Borrower to pay Property Charges has not been
      met; III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs
      Reverse Mortgages 2. Default Servicing Handbook 4000.1 1495 Last Revised: 11/26/2025
      • state that the Borrower’s failure to pay Property Charges within 30 Days of
      the notice will result in the HECM becoming Due and Payable; • where applicable,
      include the amount of corporate funds advanced by the Mortgagee on the Borrower’s
      behalf to satisfy the unpaid Property Charge and state that the Borrower’s failure
      to reimburse the Mortgagee within 30 Days of the notice will result in the HECM
      becoming Due and Payable; • provide notice of availability of housing counseling;
      and • provide information regarding Loss Mitigation Options that may be available
      to a Borrower in default, including: • refinancing the defaulted HECM into a
      new HECM if possible under all applicable origination requirements; • state,
      local, or other government assistance programs available for Borrowers; and
      • disposition options including sale of Property or DIL. (C) Requesting Due
      and Payable If a property charge default has not been cured within 30 Days of
      notifying the Borrower of unpaid Property Charges, the Mortgagee must submit
      to HUD a Due and Payable request, in accordance with the Due and Payable policies.
      Where the Mortgagee is willing to offer the Borrower an available Loss Mitigation
      Option, the Mortgagee may request a property charge loss mitigation extension
      to the foreclosure time frame in HERMIT following the guidance in the Mortgagee
      Extension for Property Charge Loss Mitigation section. (D) Permissible Loss
      Mitigation Options Available for HECMs in Due and Payable Status If the Loss
      Mitigation Options identified in the Property Charge Delinquency letter are
      unavailable, have been declined by the Borrower, or have been otherwise exhausted,
      the Mortgagee may review the Borrower for the following: • Option 1: Repayment
      Plan to satisfy outstanding corporate advances made for property charge defaults;
      or • Option 2: an extension of the foreclosure time frames due to an At-Risk
      HECM Borrower. The Mortgagee will not be reimbursed for any amount greater than
      the MCA, even if the HECM balance exceeds 100 percent of the MCA due to the
      Mortgagee providing a Repayment Plan. In addition, a HECM with an active Repayment
      Plan is not eligible for assignment to HUD. (1) Option 1: HECM Loss Mitigation
      Repayment Plan The Mortgagee must determine the Borrower’s ability to support,
      and likelihood of success under, a Repayment Plan before offering this Loss
      Mitigation Option. III. SERVICING AND LOSS MITIGATION B. Title II Insured Housing
      Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1496 Last Revised:
      11/26/2025 If the Borrower will not be able to repay the corporate advance within
      the permissible time, this Loss Mitigation Option is not available. Additionally,
      any permissible Repayment Plan must provide that in the event the last surviving
      Borrower dies before the Repayment Plan is paid in full, any outstanding amounts
      owed become immediately due and must be satisfied within 30 Days. The Mortgagee
      must follow the steps below when evaluating a Borrower for a Repayment Plan.
      (a) Assessing the Borrower for a Repayment Plan When assessing a Borrower for
      a Repayment Plan, the Mortgagee must evaluate the Borrower’s ability to repay
      the Mortgagee’s corporate advances through a Repayment Plan by using the financial
      information provided by the Borrower and the calculation instructions below.
      The Mortgagee must determine the shortest time period necessary, not to exceed
      five years, for the Repayment Plan to ensure repayment at the earliest possible
      date. (b) Repayment Plan Calculation (i) Calculate Total Arrearage The total
      arrearage is determined by adding the outstanding corporate advances for taxes
      and/or insurance made for the account to any Property Charges due for the next
      90 Days. HOA and Condominium Association dues may be included in the total arrearage
      at the Mortgagee’s discretion. (ii) Calculate Monthly Surplus Income The Borrower’s
      monthly surplus income is the total amount of income as stated by the Borrower,
      less: • the Borrower’s necessary living expenses; and • one-twelfth of the Property
      Charges due over the next 12 months. (iii)Calculate Repayment Plan Terms The
      Mortgagee must determine if the Repayment Plan can be achieved using 25 percent
      of the Borrower’s monthly surplus income. If the total arrearage amount divided
      by 25 percent of the Borrower’s monthly surplus income, rounded up to the nearest
      whole month, is: • 60 months or less, the result is the required length of the
      Repayment Plan; or • more than 60 months, the Mortgagee must determine the percentage
      of the Borrower’s monthly surplus income needed to repay in 60 months: III.
      SERVICING AND LOSS MITIGATION B. Title II Insured Housing Programs Reverse Mortgages
      2. Default Servicing Handbook 4000.1 1497 Last Revised: 11/26/2025 • if the
      resulting percentage would represent a reasonable expectation of the Borrower’s
      performance, the required length of the Repayment Plan is 60 months; or • if
      the resulting percentage would represent an unreasonable expectation of the
      Borrower’s performance, the Borrower’s surplus income is insufficient to support
      a Repayment Plan and this option is no longer available. (iv) Insufficient Surplus
      Income for a Repayment Plan Where the Mortgagee determines that the Borrower’s
      surplus income is insufficient to support a reasonable Repayment Plan, the Mortgagee
      may assess the Borrower for an At-Risk extension. (c) Additional Unpaid Property
      Charges or Hardship Experienced after Establishing a Repayment Plan (i) Additional
      Unpaid Property Charges In cases where there is an active Repayment Plan, the
      Mortgagee may re- evaluate the Borrower for a new Repayment Plan if the Borrower
      again fails to pay the required Property Charges. The Mortgagee must solicit
      new financial information from the Borrower to conduct this assessment. To revise
      the Repayment Plan the Mortgagee must use a recalculated total arrearage, including
      all outstanding corporate advances made. The Mortgagee must determine the maximum
      permitted length of a new Repayment Plan by subtracting the number of months
      of previous Repayment Plan participation from 60 months, which is the maximum
      available time frame. The Mortgagee must then determine if the new Repayment
      Plan can be achieved using 25 percent of the Borrower’s monthly surplus income.
      If the revised total amount divided by 25 percent of the Borrower’s monthly
      surplus income, rounded up to the nearest whole month, is: • no more than the
      maximum permitted length as calculated above, the result is the required length
      of the new Repayment Plan; or • more than the maximum permitted length, the
      Mortgagee must determine the percentage of the Borrower’s monthly surplus income
      needed to repay within the permitted time period: • if the resulting percentage
      would represent a reasonable expectation of the Borrower’s performance, the
      required length of the new Repayment Plan is the maximum permitted time; or
      • if the resulting percentage would represent an unreasonable expectation of
      the Borrower’s performance, the Borrower’s III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing
      Handbook 4000.1 1498 Last Revised: 11/26/2025 surplus income is insufficient
      to support a new Repayment Plan and this option is no longer available. The
      required minimum monthly payment for a new Repayment Plan equals the revised
      total arrearage divided by the length of the new Repayment Plan. (ii) Experienced
      Hardships If the Borrower experiences a decrease in their surplus income due
      to a verified hardship (e.g., illness, death of a household member who was identified
      as a contributor of income in a previous Repayment Plan calculation, emergency
      home repair, loss of employment income, etc.) and requests a Repayment Plan
      adjustment, the Mortgagee must solicit new financial information from the Borrower
      to conduct a new Repayment Plan assessment. To revise the Repayment Plan the
      Mortgagee must use a recalculated Borrower’s surplus income amount. The Mortgagee
      must determine the maximum permitted length of a new Repayment Plan by subtracting
      the number of months of previous Repayment Plan participation from 60 months,
      which is the maximum available time frame. The Mortgagee must then determine
      if the new Repayment Plan can be achieved using 25 percent of the Borrower’s
      new monthly surplus income. If the total amount divided by 25 percent of the
      Borrower’s new monthly surplus income, rounded up to the nearest whole month,
      is: • no more than the maximum permitted length as calculated above, the result
      is the required length of the new Repayment Plan; or • more than the maximum
      permitted length, the Mortgagee must determine the percentage of the Borrower’s
      new monthly surplus income needed to repay within the permitted time: • if the
      resulting percentage would represent a reasonable expectation of the Borrower’s
      performance, the required length of the new Repayment Plan is the maximum permitted
      time; or • if the resulting percentage would represent an unreasonable expectation
      of the Borrower’s performance, the Borrower’s surplus income is insufficient
      to support a new Repayment Plan and this option is no longer available. The
      required minimum monthly payment for a new Repayment Plan equals the total arrearage
      divided by the length of the new Repayment Plan. III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing
      Handbook 4000.1 1499 Last Revised: 11/26/2025 (iii)Insufficient Surplus Income
      for a New Repayment Plan Where the Mortgagee determines that the Borrower’s
      surplus income is insufficient to support a reasonable new Repayment Plan, the
      Mortgagee may assess the Borrower for an At-Risk extension. (d) Unsuccessful
      Repayment Plan Performance A Borrower’s Repayment Plan performance is unsuccessful
      when a full monthly payment is not made within 60 Days of the monthly payment
      due date. Where a Borrower fails to perform successfully under an existing Repayment
      Plan, the Mortgagee may consider one of the following options: • if the Mortgagee
      determines that a recalculated Repayment Plan results in reasonable payments,
      provide the Borrower with such; or • if the Mortgagee determines that a recalculated
      Repayment Plan results in unreasonable payments, assess the Borrower for an
      At-Risk extension. If a Repayment Plan is unsuccessful and either the Mortgagee
      chooses not to offer one of the above options or, after considering the options,
      determines neither is available, any extension to the foreclosure time frames
      cease immediately and the Mortgagee must proceed in accordance with HUD’s regulations.
      However, the Mortgagee may receive an automatic 90-Day extension after a failed
      Repayment Plan to resume or restart foreclosure. (e) Repayment Plans Satisfied
      Immediately Upon Death Any approved property charge loss mitigation extension
      immediately ceases when the last surviving Borrower dies. Any outstanding corporate
      advances owed become immediately due. If any amount owed is not satisfied within
      30 Days, the Mortgagee must proceed with calling the HECM Due and Payable. If
      any outstanding amounts due are satisfied, the Mortgagee must request that the
      Due and Payable status on the HECM related to the repayment of any approved
      Property Charges be rescinded. (2) Option 2: Allowable Foreclosure Extensions
      for At-Risk HECM Borrowers (a) Definition An At-Risk HECM Borrower refers to
      a Borrower who is in default for unpaid Property Charges, has insufficient surplus
      income to support a Repayment Plan, or was unsuccessful in their Repayment Plan
      and meets the following criteria: III. SERVICING AND LOSS MITIGATION B. Title
      II Insured Housing Programs Reverse Mortgages 2. Default Servicing Handbook
      4000.1 1500 Last Revised: 11/26/2025 • the youngest living Borrower is at least
      80 years of age; and • the Mortgagee has determined that the Borrower or Family
      Member receiving care in the residence has critical circumstances such as a
      supported terminal illness or substantiated long-term physical disability. (b)
      Standard To request a property charge loss mitigation extension for an At-Risk
      HECM Borrower, the Mortgagee must use the appropriate timeline in HERMIT and
      identify their request as At-Risk. Upon request of the Mortgagee, HUD will determine
      whether an extension will be granted and reserves the right to require the Mortgagee
      to timely proceed to foreclosure. If the last surviving Borrower dies or one
      of the required criteria cease to be met, any approved extension ceases immediately
      and the Mortgagee must proceed in accordance with HUD’s regulations. (c) Required
      Documentation The Mortgagee must include supporting documentation with the extension
      request validating that the Borrower meets the definition of an At-Risk Borrower.
      (E) Optional Delay to Submit a Due and Payable Request for Low Balance Arrearages
      The Mortgagee may delay submitting a due and payable request to HUD for HECMs
      with a total Property Charge arrearage amount that is $5,000.00 or less by uploading
      documentation into HERMIT establishing that either: • the Mortgagee is unable
      to contact the Borrower, and: • the Mortgagee has received the Borrower’s current
      annual Occupancy Certification; and • the Mortgagee has no indication that the
      Borrower has vacated the Property; or • the Mortgagee has contacted the Borrower,
      and: • the Borrower has expressed a willingness to repay; and • the Borrower
      is currently making payments or partial payments. The Mortgagee must submit
      a due and payable request to HUD immediately upon the occurrence of any of the
      following events, whichever occurs first: • the Borrower fails to timely complete
      the annual Occupancy Certification; • the Borrower no longer occupies the Property
      securing the HECM as their Principal Residence; III. SERVICING AND LOSS MITIGATION
      B. Title II Insured Housing Programs Reverse Mortgages 2. Default Servicing
      Handbook 4000.1 1501 Last Revised: 11/26/2025 • 12 months have elapsed from
      the first missed property tax and/or Hazard Insurance payment, and the Mortgagee
      is still unable to contact the Borrower; • the Borrower has expressed an unwillingness
      to repay; or • the total arrearage exceeds $5,000.00. (F) Rescission of Due
      and Payable for a Mortgagee-Funded Cure A Mortgagee may request HUD rescind
      a previous due and payable approval where the Mortgagee has completed a Mortgagee-Funded
      Cure and there are no other outstanding reasons for default. (G) Curing the
      Default Following a Due and Payable Request At any time prior to a foreclosure,
      the HECM default may be cured if the Borrower or Eligible NBS: • becomes current
      on all Property Charges; • repays all applicable corporate advances made by
      the Mortgagee; and • fully cures any outstanding reasons for default. Where
      the last surviving Borrower has died and there is an Eligible NBS, the Deferral
      Period Requirements will apply after the property charge default is cured. HECMs
      with Repayment Plans or an At-Risk extension are not eligible for assignment
      until the default is cured, at which time the Mortgagee may assign the HECM
      in accordance with guidance for submitting assignment requests. (H) Assignment
      Following a Mortgagee-Funded Cure A Mortgagee may choose to assign a HECM that
      meets all other eligibility criteria for assignment following completion of
      a Mortgagee-Funded Cure. A Mortgagee-Funded Cure is complete only after the
      Borrower has made at least one year of Property Charge payments during which
      the Mortgagee has not advanced any additional funds on the Borrower’s behalf.
      The Mortgagee must identify the Mortgagee-Funded Cure in HERMIT under the “Alerts”
      tab as follows: • New – select “Insurance Default” or “Tax Default;” • Alert
      Date – enter the date of the Mortgagee-Funded Cure; • Expiration Date – enter
      the Alert Date plus three years; • Alert Amount – enter the amount funded by
      the Mortgagee; • Status – enter “Active;” and • Alert Note – enter “Mortgagee-Funded
      Cure.” The Mortgagee will not be reimbursed for any amount greater than the
      HECM’s MCA in any claim for FHA insurance benefits. III. SERVICING AND LOSS
      MITIGATION B. Title II Insured Housing Programs Reverse Mortgages 2. Default
      Servicing Handbook 4000.1 1502 Last Revised: 11/26/2025 iii. Required Documentation
      (A) Due and Payable Notice Where the Borrower has failed to cure the default
      and the HECM has been called Due and Payable, the Mortgagee must provide the
      Borrower a Due and Payable notice in accordance with HUD’s Due and Payable policies.
      (B) Property Charge Loss Mitigation Extension for Repayment Plans When an extension
      to the foreclosure time frames is taken due to the use of a Repayment Plan,
      the Mortgagee must upload in HERMIT a fully executed Repayment Plan agreement
      that provides the following information: • date of agreement; • total outstanding
      arrearage; • monthly surplus income amount; • Repayment Plan term; • monthly
      Repayment Plan amount; and • due date of next monthly Repayment Plan amount.
      (C) Ongoing Reporting Requirements for Repayment Plans When a HECM becomes eligible
      to be called Due and Payable as a result of the Borrower’s failure to pay property
      taxes and/or Hazard Insurance, the Mortgagee must report the default event using
      HERMIT. While a HECM is on a Repayment Plan, the Mortgagee must update HERMIT
      monthly with the following information: • total outstanding arrearage; • monthly
      surplus income; • term of Repayment Plan; • amount of monthly Repayment Plan
      payment; • due date of next monthly payment; • when a Borrower experiences a
      hardship; and • reason for hardship. When the default is subsequently cured,
      the Mortgagee must upload supporting documentation into HERMIT, reflecting the
      resolution of the default. III. SERVICING AND LOSS MITIGATION B. Title II Insured
      Housing Programs Reverse Mortgages 2. Default Servicing Handbook 4000.1 1503
      Last Revised: 11/26/2025'
  judgment: false
