Reverse Mortgage Property Taxes and Insurance in California

Who Pays the Property Tax Bill on a Reverse Mortgage Home

Who pays the tax bill? The borrower does. Under 24 C.F.R. § 206.205, property taxes, including special assessments, along with hazard insurance and any flood insurance premiums, are obligations of the borrower. They are paid through a set-aside account, by the borrower, or by the lender, as that rule's paragraphs provide. Unless a set-aside account is in place, the bill keeps arriving at the house and the homeowner keeps paying it.

How the tax is figured does not change because of the loan. California's Proposition 13 generally limits how much a home's assessed value, the value the county taxes, can rise each year while the same owner keeps it. For a long-time owner, that often means a tax bill tied to an older value rather than today's market. Proposition 19, which took effect in 2021, changed the rules on whether a child who inherits a parent's home can keep the parent's tax base. That matters for heirs later, and the county assessor can explain how it applies to a particular home.

Two California programs can ease the bill. The homeowners' exemption reduces the taxable value of a qualifying owner-occupied home by $7,000, under Cal. Rev. & Tax. Code § 218. The State Board of Equalization explains that it takes a one-time filing with the county assessor, filed no later than February 15 for the full exemption that year.

The Property Tax Postponement Program lets eligible homeowners defer current-year taxes, which must eventually be repaid with interest. The State Controller's Office lists eligibility requirements including being at least 62, or blind, or disabled, having at least 40 percent equity, and not having a reverse mortgage on the property. Its program page also lists an annual household income of $57,002 or less for 2026-27, among other requirements. Funding is limited, and not everyone who qualifies may be approved.

The county tax collector handles bills and payment schedules. Unpaid taxes become a lien, a legal claim, on the home and are also a default under the loan.

Homeowners Insurance Requirements

Insurance protects the house, and the house is what secures the loan. That is why a reverse mortgage requires the borrower to keep homeowners insurance in force the whole time. Hazard insurance premiums, and flood insurance premiums where they apply, are borrower obligations under 24 C.F.R. § 206.205, the property-charge rule described above. The lender or the servicer, the company that manages the loan after closing, typically asks for proof of coverage and expects to be named on the policy as mortgagee or loss payee, so that a claim payment protects both the owner and the loan.

If coverage lapses, the servicer may buy a policy itself. This is called force-placed insurance: coverage the servicer purchases to protect the lender's interest in the home. It is typically more expensive than a policy the homeowner picks, and it may protect the homeowner's belongings and liability far less, or not at all. Its cost is charged to the borrower.

A lapse is more than a cost problem. Not paying a required property charge is one of the events that can make a HECM due and payable, as the next sections explain.

Families in parts of California know that homeowners insurance has become harder to find and more expensive in recent years, especially in areas with higher wildfire risk. For a borrower planning to stay put for many years, that is a real planning question: can the household keep paying the premium if it rises? The California Department of Insurance is the state agency that oversees homeowners insurance and publishes consumer information on finding and keeping coverage. A homeowner can also read more about reverse mortgage property taxes and insurance in general terms.

The Life Expectancy Set-Aside (LESA): What It Is and When It Applies

Some borrowers would rather the tax and insurance bills be handled out of the loan itself. That is what a Life Expectancy Set-Aside does. A LESA is a portion of the loan proceeds held back at closing in a dedicated account and used over time to pay property taxes and insurance. The federal property-charge rule, 24 C.F.R. § 206.205, names the LESA as one of the ways these charges are paid.

Before a HECM closes, the lender completes a financial assessment, a review of the borrower's credit, income, and history of paying property taxes and insurance. It asks a practical question: does this household look able to keep up with these bills? Under HECM program rules, when the assessment raises doubts, the lender may require a LESA as a condition of the loan. A borrower who passes the assessment may also choose a LESA voluntarily. The reverse mortgage financial assessment explains that review in more detail.

There are two kinds. With a fully funded LESA, the servicer pays the property taxes and insurance directly from the account as they come due. With a partially funded LESA, the borrower still pays those bills, and the account works as a reserve that supplements the borrower's own payments.

A LESA has a cost of its own. Money placed in the set-aside is not available to the borrower for other uses, so it reduces the net proceeds, the amount left after costs and set-asides, at closing. The amount set aside depends on the home's tax and insurance bills and program formulas; the lender calculates it and discloses it. HUD describes the HECM program as letting borrowers stay in their homes indefinitely as long as property taxes and homeowner's insurance are kept current, which is the goal a LESA is built to serve.

A Missed Property Charge: What Default and Repayment Look Like

What if a bill gets missed? This is the part families worry about most, and it helps to see the steps plainly. Under 24 C.F.R. § 206.27(c)(2), a HECM's outstanding balance becomes due and payable in full, upon approval of HUD's Commissioner, if any of these occur: the home stops being a borrower's principal residence for reasons other than death and no other borrower lives there; a borrower is away for longer than 12 consecutive months because of physical or mental illness and no other borrower lives there; the borrower does not pay property charges as required; or another obligation under the mortgage is not performed.

An unpaid tax bill or a lapsed policy is often called a technical default: the borrower owes no monthly loan payment, but has not kept a condition of the loan. The servicer typically notifies the borrower in writing, and because HUD's approval is part of calling the loan due, HUD is involved in the process.

There may be a path back. HUD's program rules have allowed repayment plans in some cases, letting a borrower who has fallen behind on property charges catch up over time. Whether one is available, and on what terms, depends on current HUD rules and the borrower's facts. It is an option to ask about, not a promise.

If the default is not cured, the loan can be called due, and foreclosure can follow. The CFPB warns that a borrower could face foreclosure after running out of money for property taxes, insurance or other housing expenses. California law governs how a foreclosure proceeds here, including its notices and timing. The CFPB also explains when a reverse mortgage must be repaid.

A borrower who receives a default notice can contact the servicer promptly and can also reach a HUD-approved housing counselor. Time matters, and both can explain what options remain.

California-Specific Protections and Counseling Requirements

California adds its own layer to the federal rules, and its purpose is time and clarity. Federal law already requires counseling. Under 12 U.S.C. § 1715z-20(d)(2)(B), a HECM borrower must receive counseling from an independent third party not associated with or paid by those originating the loan or selling other financial products. The counselor discusses topics including options other than a HECM, such as property tax deferral, and the loan's financial implications.

California Civil Code section 1923.2 reaches every reverse mortgage made in the state. It reads in part: "A lender shall not accept a final and complete application for a reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant until the lapse of seven days from the date of counseling, as evidenced by the counseling certification." That is California's seven-day cooling-off period. The same subdivision requires a counseling certificate signed by the borrower and the counselor, and counseling in person unless the applicant chose another method.

Section 1923.2 also requires the lender to give the borrower a list of at least 10 HUD-approved counseling agencies before accepting a final application, and bars the counseling agency from being paid by the lender or by sellers of annuities, insurance or investments. It prohibits requiring an annuity purchase as a condition of the loan.

These rules are a feature. The counseling session is a real conversation about whether the loan fits, not a sales step, and the waiting week gives a family room to talk it over. The reverse mortgage eligibility rules explain the counseling requirement alongside the others.

Two state agencies oversee the field. The California Department of Financial Protection and Innovation explains that anyone in the business of making or servicing residential mortgage loans in California generally needs a license, with exemptions including licensed real estate brokers. The California Department of Real Estate has warned seniors about reverse mortgage scams offering misleading terms or fees.

Other Options Worth Knowing If Taxes and Insurance Are the Worry

If the real worry is keeping up with taxes and insurance on a fixed income, a reverse mortgage is one answer among several. Each option trades something different.

A budget and benefits review. Looking closely at monthly costs and checking for public benefits can free up money without borrowing. It takes time and paperwork, and the savings may be modest.

California property tax relief. The homeowners' exemption and the Property Tax Postponement Program, described above, can lower or defer the tax bill. Postponed taxes still build up with interest and must be repaid, and the program requires that the home not have a reverse mortgage.

A home equity loan or line of credit. These let an owner borrow against the home and repay in monthly installments. The CFPB notes they might be cheaper but usually carry monthly payments and depend on income and credit.

A cash-out refinance. This replaces the current mortgage with a larger one and pays out the difference. It brings a new monthly payment and new closing costs.

Help from family. Relatives may help with bills or share housing costs. It keeps debt off the house but depends on family means and clear agreements.

Selling and downsizing. Moving to a less expensive home can lower taxes, insurance and upkeep at once. It means leaving a familiar place and paying moving and sale costs.

A reverse mortgage. It lets an owner draw on equity without monthly loan payments. Interest and charges are added to the balance so the amount owed grows, the home must remain the principal residence, the taxes, insurance and upkeep continue, and the loan generally comes due when the last borrower dies, sells or moves out.

A HUD-approved housing counselor can help compare these. HUD offers a counselor search through the HECM program page and at (800) 569-4287.