HECM and Property Tax Relief for Seniors

Silda Nikaj
Texas Christian University

Joshua J. Miller
U.S. Department of Housing and Urban Development

Opinions expressed in this article are those of the authors and do not necessarily reflect the views and policies of the U.S. Department of Housing and Urban Development, the U.S. government, or other institutions.

In a recent paper examining default risk in the Home Equity Conversion Mortgage (HECM) program, Moulton, Haurin, and Shi (2015) found that property tax amount and tax burden (property taxes/income) are highly predictive of severe default on property taxes and insurance. Given the importance of the tax burden in predicting default, in this article we summarize state- and local-level property tax relief programs targeted toward seniors that could reduce property tax bills among HECM participants. We find the tax savings provided by these programs to be large enough to significantly reduce property tax liability. Our analysis highlights the importance of annual validation of tax accounts to ensure that individual HECM borrowers take full advantage of all tax relief programs. Validating tax accounts periodically, in turn, would reduce the tax burden and most likely reduce the probability of tax default among HECM participants.