HECMAcademy · Colorado · 10 min read · Updated July 2026
Colorado Reverse Mortgage in 2026: The 5-Year Natural Disaster Absence Protection, the Means-Tested Benefits Shield, and the Tax Deferral Subordination Problem
Colorado has one of only a handful of state reverse mortgage acts in the country — C.R.S. §§ 11-38-101 through 11-38-112 — and two of its provisions are genuinely unique. § 11-38-107, added by HB23-1266 in 2023, gives Colorado HECM borrowers up to five years of protected absence following a natural disaster without triggering default. § 11-38-110 shields HECM proceeds from means-tested benefit calculations. If you live in a wildfire or flood zone, or you rely on Medicaid or SNAP, these two provisions materially change the HECM calculus in Colorado versus any other state.
Sources: Colorado Revised Statutes, Title 11, Article 38; HB23-1266 (2023); SB24-111 (2024); Colorado Department of the Treasury — Property Tax Deferral; Zillow ZHVI (2025).
Colorado senior homeowner market
Colorado's senior housing market divides into three price zones: the Front Range core (Denver, Fort Collins, Colorado Springs), high-amenity mountain towns (Aspen, Vail, Telluride, Crested Butte), and the more moderate Western Slope and Eastern Plains. Wildfire and flood exposure — Marshall Fire, Cameron Peak Fire, 2013 Front Range floods, and Interstate 70 corridor risk — is a material factor across the Front Range and mountains, which makes the Reverse Mortgage Act's § 11-38-107 protection uniquely relevant.
Principal-limit examples by Colorado market (mid-2026)
The following illustrates estimated principal limits for a 70-year-old borrower at expected rates typical of mid-2026, using Zillow Home Value Index (ZHVI) values.
| Market bracket | Home Value | Est. Principal Limit at Age 70 (~55%) | After $85K existing mortgage payoff |
|---|---|---|---|
| Colorado Springs ($500K), Pueblo, Grand Junction | $450,000 | ~$247,000 | ~$162,000 |
| Denver ($525K), Fort Collins ($585K) | $625,000 | ~$344,000 | ~$259,000 |
| Boulder ($854K), close-in Denver neighborhoods | $875,000 | ~$481,000 | ~$396,000 |
Illustrative estimates using a ~55% principal-limit factor at age 70 and expected rates typical of mid-2026. Actual figures depend on your specific age, appraised value, expected rate at closing, and HUD's current tables. The 2026 FHA HECM lending limit is $1,249,125. Metro medians per Zillow ZHVI (2025).
Where the FHA cap matters in Colorado
Denver, Fort Collins, and Colorado Springs medians sit below the $1,249,125 FHA cap. Boulder single-family homes routinely approach or exceed it. The mountain resort corridor — Aspen, Vail, Telluride, and much of Summit and Pitkin counties — is almost entirely above the cap. On those properties the standard HECM principal-limit calculation stops at $1,249,125 regardless of appraisal; proprietary jumbo reverse mortgages are the alternative to price out.
The Colorado Reverse Mortgage Act (§§ 11-38-101 to 112)
Two provisions in the Colorado Reverse Mortgage Act genuinely stand out among state HECM overlays:
- § 11-38-107 — 5-year natural disaster absence protection. Added by HB23-1266 (2023). If your Colorado home is rendered uninhabitable by a natural disaster (wildfire, flood, tornado, hail damage sufficient to displace occupancy, etc.), a Colorado HECM lender cannot treat the resulting absence from the property as an occupancy default for up to five years, provided you continue to work toward returning. HUD's default rule is a 12-month absence trigger; Colorado extends that window materially for disaster-caused displacement. This is directly relevant to the Marshall Fire recovery corridor, Cameron Peak burn area, and much of the Colorado wildland-urban interface.
- § 11-38-110 — means-tested benefits shield. HECM proceeds — both undrawn line-of-credit availability and drawn funds held for reasonable time — are shielded from being counted as a resource or asset for Colorado means-tested benefit calculations. This is meaningful for Colorado seniors who rely on Health First Colorado (Medicaid), SNAP, or similar programs and would otherwise be at risk of losing benefits after a HECM draw.
Senior Homestead Exemption and the Property Tax Deferral subordination problem
Colorado offers two senior property-tax programs; both interact with a HECM:
- Senior Homestead Exemption (C.R.S. § 39-3-203). Exempts 50% of the first $200,000 of actual value on a primary residence. Age 65+, 10-year continuous ownership and occupancy, no income test. Suspended in past state budget cycles and reinstated for tax year 2025. HECM has no effect on eligibility.
- Property Tax Deferral (C.R.S. § 39-3.5-102). Lets qualifying homeowners defer payment of property taxes; the state pays and files a lien. Colorado's Deferral will generally not accept a home with an existing reverse mortgage unless the HECM lender executes a subordination agreement allowing the Deferral lien to sit ahead of, or in an acceptable position relative to, the HECM lien. Most HECM servicers will not subordinate a first-lien HECM to a subsequent tax-deferral lien, which effectively closes off the Deferral for many post-HECM Colorado borrowers. SB24-111 (2024) added portability of the Deferral between residences but did not change the subordination requirement.
Colorado HECM FAQ
How does Colorado's 5-year natural disaster absence protection work with a HECM?
Under C.R.S. § 11-38-107, added by HB23-1266 in 2023, a Colorado HECM lender cannot treat an absence caused by a natural disaster that renders your home uninhabitable as an occupancy default for up to five years, provided you continue to work toward returning. This is a Colorado-specific extension of HUD's default 12-month occupancy trigger and matters especially in the wildland-urban interface and the Marshall Fire / Cameron Peak recovery areas.
Are Colorado HECM proceeds counted for Medicaid or SNAP eligibility?
Under C.R.S. § 11-38-110, HECM proceeds — including undrawn line-of-credit availability and drawn funds held for a reasonable time — are shielded from being counted as a resource or asset for Colorado means-tested benefit calculations. Always confirm current program rules with your county's Health First Colorado or SNAP office, but the statutory shield exists.
Can I combine Colorado's Property Tax Deferral with an existing reverse mortgage?
Generally, no. Colorado's Property Tax Deferral (C.R.S. § 39-3.5-102) will not accept a home with an existing reverse mortgage unless the HECM lender executes a subordination agreement allowing the Deferral lien to sit ahead of the HECM. Most HECM servicers will not subordinate a first-lien HECM to a subsequent tax-deferral lien, which effectively closes the Deferral off to most post-HECM borrowers.
Does Colorado's Senior Homestead Exemption still apply if I take out a HECM?
Yes. The Senior Homestead Exemption (C.R.S. § 39-3-203) — 50% of the first $200,000 of actual value, age 65+, 10-year continuous ownership/occupancy, no income test — is tied to owner-occupancy, not to whether the home is encumbered. It was reinstated for tax year 2025 after prior budget suspensions.
My Boulder or mountain resort home is worth well over $1.25 million. Does the FHA cap limit me?
Yes. The 2026 FHA HECM lending limit is $1,249,125. Value above the cap does not increase your principal limit on a standard HECM. For Boulder single-family homes and most of Aspen, Vail, Telluride, and Summit/Pitkin county resort properties above the cap, ask lenders about proprietary jumbo reverse mortgages, which are not FHA-insured.
Does Colorado require its own reverse mortgage counseling beyond HUD?
Federal HUD counseling with a HUD-approved HECM counselor is required. The Colorado Reverse Mortgage Act layers state protections on top; the counseling requirement itself is the HUD standard.
How to apply
HECMAcademy provides a free pre-qualification form matching Colorado homeowners with FHA-approved lenders licensed in the state. Start your pre-qualification →
HUD counseling is required before any Colorado lender may accept your application. Find a HUD-approved counselor in Colorado →