If you've inherited a home with a reverse mortgage, don't assume the bank gets the house. Find out the current balance, the property value, the deadlines, and who has authority to act, then decide whether keeping or selling best protects the family's equity.
Start with the steps below: identify who is on the loan, contact the servicer, determine authority, get a valuation, and decide keep versus sell.
Step 1: Find Out Who Is on the HECM
Determine the borrower, any co-borrower, any eligible non-borrowing spouse, and the servicer of the loan.
A surviving co-borrower can generally remain in the home and continue under the HECM as long as the loan obligations remain satisfied. Certain eligible non-borrowing spouses may also receive protections under HUD rules, depending on the loan date and current HUD requirements.
Step 2: Contact the Servicer
Do not ignore servicer mail. Tell the servicer about the death and ask:
- What documentation is required?
- What is the current balance?
- Has the loan been declared due and payable?
- What deadlines apply?
- What extension options exist?
Step 3: Determine Who Has Authority Over the Property
Depending on how the home was owned, this could involve a trustee, personal representative, surviving owner, probate estate or other authorized party.
Get probate or trust counsel where needed.
Step 4: Determine Property Value
The decision depends heavily on value.
Hypothetical example
Home value
$700,000
HECM balance
$300,000
There may be approximately $400,000 of gross equity before selling costs and other liens. That is worth protecting. Figures are hypothetical for illustration only.
Step 5: Decide Whether to Keep or Sell
Keep the home
Heirs may need to pay the required HECM payoff through cash, a new mortgage, or other financing.
Sell the home
Sale proceeds satisfy the HECM, other liens and closing costs. Heirs keep the remaining net proceeds.
What If the Loan Is More Than the Home Is Worth?
Current CFPB guidance states that heirs generally do not need to pay more than the applicable HECM non-recourse amount.
If the loan balance exceeds the property value, heirs can generally satisfy the HECM by paying the required amount tied to the appraised value under current rules; FHA mortgage insurance covers the qualifying remaining shortfall.
What Is the Timeline?
Current CFPB guidance says that after heirs receive a due-and-payable notice, they generally have an initial period to act, and extensions may be available while actively selling or arranging financing. The most current CFPB guidance notes a 30-day response period after the due-and-payable notice and possible extensions up to six months in qualifying circumstances.
Because servicing timelines and documentation are highly fact-specific, every family may not have exactly the same deadline. Confirm the timeline with the servicer in writing and act early.
Do Not Wait Until Foreclosure
This is critical. A reverse mortgage does not mean “the bank gets the house automatically.”
But heirs have to act. Open the mail, contact the servicer, get a valuation, get title information, and determine legal authority. Waiting is the biggest risk to the family's equity.
What If a Spouse Still Lives There?
A co-borrowing spouse generally continues under the loan. A qualifying eligible non-borrowing spouse may also be able to remain, depending on the HECM loan date and HUD requirements.
Do not assume a spouse who was not on the loan automatically has to leave, or automatically gets permanent protection. Get the servicer and a HUD-approved counselor involved.
What If an Adult Child Lives There?
Living in the property does not automatically make an adult child a protected HECM borrower.
The family may need to pay off the HECM, refinance, sell, or use other available options, and the timeline for action still applies.
A Worked Example
Hypothetical example
Home value
$575,000
HECM payoff
$225,000
After the HECM and other selling costs, remaining proceeds go to the estate or heirs according to ownership and estate law. The lender does not simply keep all $575,000. Figures are hypothetical for illustration only.
How Lisa Helps
Lisa can help a family establish market value, evaluate the selling timeline, prepare the inherited property for sale, estimate the seller net, coordinate title and escrow, work with the trustee or personal representative, and coordinate with the HECM servicer payoff process. Legal authority and estate issues belong with appropriate counsel, and the servicer and HUD rules govern the loan. Lisa is a REALTOR®, not an attorney or estate planner.
