"My Parent Had a Reverse Mortgage and Died. What Do the Heirs Have to Do, and Can We Keep the Home?"

After a parent passes away, a letter arrives from the company that services their reverse mortgage. The letter is addressed to the estate, it names the heirs, and it uses a phrase nobody in the family has heard before: due and payable.

Heirs have 30 days from the date on the notice letter to pay off a reverse mortgage, sell the home, or sign it over to the lender, and the rule limits the lender to collecting through the home.

I'm sorry about your parent. The letter arrives at a hard time.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. The servicer is the company that collects on the loan, and everything here is about the HECM, which is FHA's reverse mortgage, as HUD's rule reads on October 28, 2026. How a reverse mortgage works covers the loan itself.

When the loan comes due

A reverse mortgage sends no monthly bill, so there is no payment for the family to take over. The whole balance, which is the money your parent drew plus the interest and mortgage insurance added over the years, comes due at once. HUD's rule on when the loan comes due says that happens when a person on the loan dies and the home is no longer the main residence of anyone else on the loan. If your other parent is also on the loan and still lives there, nothing comes due yet.

A spouse who is not on the loan can sometimes stay under what HUD calls an eligible non-borrowing spouse deferral, which means the due date is put off while that spouse lives in the home. My article on a reverse mortgage with a spouse under 62 covers the conditions. This page is for the family where no such protection applies.

The notice, and the 30 days

The servicer tells HUD the loan is due, then sends the estate and the heirs a notice. From the date of that notice, HUD's rule on the 30 days gives you 30 days to do one of these:

1. Pay the balance, including the interest, the mortgage insurance and anything the servicer advanced.
2. Sell the home for no less than an amount HUD sets, with the sale proceeds going to the loan.
3. Sign a deed in lieu of foreclosure, which means handing the home to the lender to settle the debt without a foreclosure.

The rule sets the 30 days and lets HUD allow other actions by notice, so if a sale is under contract or a refinance is in process, ask the servicer in writing whether more time is available. HUD also tells the servicer to start foreclosure within six months of the due date unless HUD approves more time.

The lender collects only through the home

A HECM is non-recourse. HUD's rule on non-recourse loans says the person who took out the loan has no personal liability for the balance, that the lender enforces the debt only through sale of the property, and that it cannot get a deficiency judgment against that person. A deficiency judgment is a court order to pay the gap between what a home sold for and what was owed.

That is why the 95 percent rule exists. If the balance has grown past the value of the home, the estate or the heirs can sell it for the amount HUD sets. The regulation says that amount cannot exceed 95 percent of the appraised value. HUD sets the exact percentage in a separate notice, so ask the servicer which figure applies to your parent's loan. After the loan is due, you can ask the servicer for an appraisal.

Keeping the home means a payoff

A child cannot take the loan over. HUD's rule on assuming the loan says the HECM is not assumable, so it cannot be moved into your name. If you want to live there, you pay the reverse mortgage off, and the usual way is a regular mortgage in your own name. You qualify for it on your own income, credit and debts, the way anyone does, and how debt-to-income works explains the ratio the lender uses.

Fannie Mae makes room when the home came to you by inheritance. Its Selling Guide section on cash-out refinances says "there is no waiting period" on an inherited home, and its section on limited cash-out refinances allows an inheritance exception to the rule that someone on the new loan already be on title when applying. If a brother or sister also inherited a share, the new loan can pay the reverse mortgage and buy out their share at the same closing, and buying out a co-owner walks through that. For a parent whose home had any other kind of mortgage, inherited home mortgages is the companion to this page.

Selling the home

If nobody in the family wants the home, selling is the plain route. Under HUD's rule on selling the home, the person with the legal right to sell the home may sell it for the amount in the 95 percent rule. The servicer then releases its mortgage so the sale can close, as long as there are no other loans against the home and all the net proceeds go to the lender. Your attorney tells you who has that legal right to sign the listing and the deed, and where any money left after the payoff goes.

Questions for the servicer's office

The servicer's number is on your parent's monthly statement. Ask for the payoff balance, the date it considers the loan due, and the name of the person handling the file. The home still secures the loan, so keep the property taxes, association dues and homeowners insurance current while you decide. An attorney can tell you who has legal authority over your parent's estate, since every option above needs that person's signature.

How I can help

I can price the new first mortgage in your name that pays the reverse mortgage off, get you pre-approved for it, and work out the figures on a buyout of a brother or sister. Getting pre-approved is where that starts. Your attorney can tell you who signs for the estate.

An illustration, with made-up numbers

Margaret, her home and every figure below are invented. Margaret was the only person on her reverse mortgage, and her daughter Ellen inherits the home.

Say the payoff is $190,000 on a home appraised at $420,000.

  Reverse mortgage payoff                $190,000
  Appraised value                        $420,000
  Equity in the home                     $230,000

Ellen wants to live there, so she applies for a regular mortgage in her own name for the $190,000 payoff plus closing costs, and the new loan pays the reverse mortgage off at closing. If she sells instead, the $190,000 goes to the lender, and what is left after closing costs is a question for the estate's attorney.

Now say the payoff is $310,000 on a home appraised at $280,000.

  Reverse mortgage payoff                $310,000
  Appraised value                        $280,000
  95 percent of the appraised value      $266,000

Here the loan has outgrown the home. If HUD's figure is the full 95 percent, the estate can sell for $266,000, and the lender releases its mortgage even though the sale falls $44,000 short of the payoff.

Your next step

If you are leaning toward keeping the home, the rate tool can price a refinance on it in your own name. You can choose a rate option there, and that selection can change as we go.

You are also welcome to call me at (843) 765-0000 or email me at jeff@solverya.com. Please have the servicer's letter, the payoff figure if you have it, and a rough idea of the home's value, and we can work out which of the two situations above is closer to yours.

Nothing here is legal advice, and nothing here is a loan approval, a denial or a commitment to lend. The rules above are HUD's and Fannie Mae's as of the dates given, and the servicer applies HUD's to your parent's file.

Common questions

How long do heirs have to deal with a reverse mortgage after the homeowner dies?

They have 30 days from the date of the servicer's notice to pay the balance, sell the home, or sign it over to the lender. Anything longer is something to ask the servicer about in writing.

Do heirs owe more than the home is worth?

HUD's rule says the lender enforces the debt only through sale of the home and cannot get a deficiency judgment against the person who took out the loan. If the balance is higher than the value, the home can be sold for the amount HUD sets, which cannot exceed 95 percent of the appraised value.

Can heirs keep the home?

Yes, by paying the loan off, usually with a regular mortgage in your own name. Fannie Mae has no waiting period for an inherited home on a cash-out refinance and an inheritance exception to its title rule on a limited cash-out refinance.

What happens if the heirs do nothing?

The servicer forecloses, and HUD tells it to start within six months of the due date unless HUD approves more time. The rule bars the lender from a deficiency judgment against the person who took out the loan, but the family can lose the home.