The Federal Housing Administration (FHA) has issued new guidelines for homeowners and lenders that use Home Equity Conversion Mortgage (HECM), a reverse mortgage program, and are dealing with outstanding property taxes and unpaid hazard insurance premiums.

FHA’s guidance is intended to assist elderly borrowers who are behind on pay property taxes and insurance premiums and that may face foreclosure, according to a statement.

"We understand that some senior citizens have not paid their taxes or insurance for some time and may be at risk of losing their home," said FHA Commissioner David H. Stevens. "Today’s guidance is designed to establish a clear framework that protects both the homeowner and the lender who participate in our reverse mortgage program."

Under the Department of Housing and Urban Development’s (HUD) current regulations, lenders are allowed to make tax and insurance payments on behalf of their elderly clients from the borrower’s available mortgage funds, according to a statement. Once those resources are exhausted, the lender must advance funds to protect FHA’s interest and obtain reimbursement from the borrower, which has resulted in an "untenable situation" that could put the FHA Insurance Fund at risk and result in foreclosure proceedings against delinquent seniors.

Under the new FHA guidance, lenders must send letters to borrowers who recently missed a property charge payment, borrowers who had an unpaid property charge balance for an extended period and to borrowers with a significant unpaid property charge balance. The lender must also offer loss mitigation options.

The FHA letter can be read in its entirety here.