When a reverse mortgage borrower dies, heirs face a ticking clock. You have options — keep the home, sell it, or walk away. But you must act within deadlines. Learn the 95% rule, HUD extensions, non-borrowing spouse protections, and how to avoid losing the home to foreclosure.
Send a certified letter to the reverse mortgage servicer with a copy of the death certificate, your contact information, and your relationship to the deceased. The 30-day clock is important — failure to notify can complicate your options.
The servicer will send a formal notice that the HECM loan is due and payable. This starts the timeline for your decision. The notice will specify the current loan balance and outline your options.
Keep the home: Pay 95% of the current appraised value or the full loan balance — whichever is less. Sell the home: List the property, sell at market value, and pay off the HECM from proceeds. Walk away: Complete a deed-in-lieu of foreclosure — the FHA insurance covers any shortfall; heirs are NOT personally liable.
HUD allows two 90-day extensions (6 months total from the due and payable notice) and can grant additional extensions up to 12 months. You must request extensions in writing and show progress toward resolution (listing for sale, seeking financing, etc.).
One of the least-known but most valuable protections for heirs: you can satisfy the reverse mortgage by paying 95% of the property's current appraised value — even if the loan balance is higher. FHA insurance covers the difference. This means if the home appraises at $300,000 but the loan balance is $350,000, you can keep the home for $285,000 (95% of $300,000). The remaining $65,000 is covered by FHA insurance — you NEVER pay more than 95% of value.
Under HUD Mortgagee Letter 2021-11, eligible non-borrowing spouses can remain in the home after the borrowing spouse dies — indefinitely — as long as they: were married to the borrower at loan origination, remain in the home as their principal residence, and continue paying property taxes and insurance. The loan becomes due when the NBS dies or moves out. This is a deferral, not a discharge of the debt.
Lost a parent with a reverse mortgage? We guide heirs through every option — no obligation, no pressure.