A Life Expectancy Set-Aside Is A Great Consumer Protection
A Life Expectancy Set-Aside (LESA) is simply monies set aside from the available
Reverse Mortgage loan proceeds that can be used only to pay property taxes and
homeowners insuranc for the expected remaining lifetime of the borrower. The
borrower is responsible for all other property charges, such as maintenance and
A LESA is one of the smartest default
protections provided to both borrowers and lenders.
The need for a LESA, the funding amount of the LESA, and the structure of the
LESA, are based on the results of the
financial assessment of the borrower. However, if even it is not
required, a borrower may request that a LESA be established for secuirty and
convenience to ensure that these obligations are always paid. This
decision can only be done at the time of closing.
There are two classifications for a Life Expectancy Set-Aside
The Life Expectancy Set-Aside Must Be Fully Funded. When the
lender determines the borrower has not demonstrated willingness to meet
financial obligations where residual income is sufficient, or where the borrower
has not demonstrated the willingness and capacity to meet financial obligations,
the LESA must be fully funded.
In the fully-funded LESA, the servicer will use HECM proceeds to pay property
taxes and insurance premiums on behalf of the borrower.
The Life Expectancy Set-Aside Is Partially Funded.
Where the lender has determined that the results of the financial assessment
show the borrower demonstrates the willingness to meet financial obligations but
has not demonstrated the capacity to do so, the LESA must be partially funded.
In this set-aside, the borrower will receive semi-annual payments from the
HECM loan proceeds to be used to pay property taxes and insurance premiums. The
borrower remains responsible for timely payment of all property charges.