How to handle a Reverse Mortgage after death.

When the last surviving borrower (or an eligible non-borrowing spouse) on a reverse mortgage passes away, the loan officially becomes due and payable.

Immediate Timeline & Next Steps

  • 1. Notification & Due Notice (First 30 Days): The loan servicer must be notified of the death. Once notified, the servicer issues a formal "Due and Payable Notice" to the estate/heirs. The heirs then have 30 days to respond and declare their intent (keep the home, sell it, or turn it over).

  • 2. Property Appraisal: The lender orders an independent appraisal to determine the current market value of the home.

  • 3. Execution / Extensions (Up to 6 to 12 Months): While the loan is technically due immediately, HUD rules for federally insured Home Equity Conversion Mortgages (HECMs) allow servicers to grant extensions (usually in 90-day increments for up to 6–12 months total) as long as the heirs show active, good-faith progress toward resolving the debt (such as listing the house for sale or securing financing).

Options for the Heirs

Reverse mortgages are non-recourse loans. Heirs are never personally responsible for any balance that exceeds the value of the home; the lender cannot touch the heirs' personal bank accounts, income, or other assets.

  1. Keep the Home: The heirs can pay off the reverse mortgage balance. Under FHA rules, if the loan balance is higher than the home's value, heirs can keep the property by paying 95% of its current appraised value (or the full balance, whichever is less) using cash or a new traditional mortgage.

  2. Sell the Home: The heirs can put the home on the market. Proceeds from the sale pay off the reverse mortgage. Any remaining equity belongs entirely to the heirs.

  3. Deed in Lieu of Foreclosure / Walk Away: If the home is underwater (the debt is far higher than the home value) and the heirs do not want the house, they can execute a Deed in Lieu of Foreclosure to hand the title over to the lender, or simply allow the lender to foreclose. The FHA mortgage insurance absorbs the loss.

Key Note: Interest, loan fees, and mortgage insurance premiums continue to accrue on the outstanding balance until the debt is paid off or ownership is transferred. Heirs or the estate must also continue paying property taxes and homeowners insurance while resolving the loan to keep the property out of default.

For the hiers.

To establish yourself as an authorized party and prevent default actions (like foreclosure), send an initial "Heir Notification & Intent Package" to the reverse mortgage servicer.

Essential Documents to Send

  1. Certified Copy of the Death Certificate

    • Purpose: Proves the borrower has passed away, triggering official timeline protections and allowing the servicer to stop mailing standard monthly statements to the deceased.

  2. Proof of Legal Authority over the Estate

    • What to include: Letters Testamentary, Letters of Administration, or Court Order of Appointment (naming you as the Executor/Personal Representative).

    • If held in a trust: A copy of the Trust Agreement showing you are the named Successor Trustee.

    • If no probate exists yet: State your legal relationship (e.g., child, surviving kin) on the Intent Form and state that probate is being opened or isn't required by local law.

  3. Written Letter of Intent

    • Purpose: Tells the servicer how you plan to resolve the debt. You must explicitly choose one of the following:

      • Keep the home: You plan to pay off or refinance the debt.

      • Sell the home: You plan to list the house to pay off the loan balance and claim remaining equity.

      • Surrender the home: You wish to execute a Deed in Lieu of Foreclosure or allow foreclosure (with zero personal liability).

  4. Third-Party Authorization Form

    • Purpose: Gives the servicer legal permission under HIPAA and privacy laws to speak directly to you about loan balances, payoffs, and appraisals. (Servicers will usually provide their specific template, but a signed letter from the executor works initially).

  5. Supporting Intent Proof (If Applicable)

    • If selling: A copy of the Real Estate Listing Agreement or a purchase contract.

    • If refinancing/keeping: A pre-approval letter from your mortgage lender.

Best Practices When Submitting

  • Send via Certified Mail with Return Receipt (or use the servicer’s secure heir portal/fax) so you have undeniable proof of the date they received it.

  • Keep the Account Active: Continue to pay property taxes and homeowners insurance while the estate is settled. Servicers can initiate default if these lapse.

  • Request a Written Extension: In your cover letter, formally request your initial 90-day timeline extension to allow time for probate, listing, or appraisal.

This is a hard time for you, hopefully you can sell the home and get money out of it. I can usually tell you a good realtor in your area or I know some I buy homes guys and are usually fair on a house that has had a Revere Mortgage because it had to pass an FHA appraisal.