A reverse mortgage in default can be a confusing and stressful situation for heirs. Many people don’t realize that when a homeowner passes away or moves out permanently, the reverse mortgage loan becomes due. If the loan isn’t repaid in time, the lender may initiate foreclosure proceedings. For heirs, this creates urgency and the need for clear information.
A reverse mortgage allows older homeowners to borrow against their home equity, usually without making monthly mortgage payments. Instead, the loan balance grows over time and is repaid when the borrower dies, sells the home, or no longer uses it as a primary residence. But if no action is taken after the last surviving borrower leaves the home, the loan can quickly fall into default.
When a reverse mortgage borrower passes, the loan becomes due and payable. The reverse mortgage lender will typically issue a due and payable notice to the heir, co borrower, or estate representative. This notice starts a countdown: heirs generally have 30 days to let the lender know what they plan to do and up to 6 months to act, though extensions may be available.
Heirs may:
The Consumer Financial Protection Bureau outlines these timelines and heir responsibilities clearly in its official FAQ for heirs.
A reverse mortgage is typically a non recourse loan, meaning heirs are not personally responsible for the full loan balance. They only need to repay the lesser of the full loan amount or 95% of the current appraised value of the home. This is true even if the loan amount exceeds the market value of the house.
For example, if the reverse mortgage balance is $300,000 but the home is worth only $250,000, heirs can satisfy the debt by paying $237,500 (95% of the home’s value). This rule helps protect families from taking on more debt than the home is worth.
If the reverse mortgage was already in default before the borrower’s death—for example, due to missed property taxes or homeowners insurance—heirs may receive a notice quickly. In this case, timelines to act may be shorter, and the foreclosure process could already be underway.
According to the FDIC’s study on default risk in HECMs, early defaults are often linked to issues like large initial withdrawals or poor credit history. Heirs may still have options to repay the loan, sell the home, or file a deed in lieu of foreclosure to avoid legal proceedings.
Yes, heirs can keep the home with a reverse mortgage by paying off the reverse mortgage debt. That means repaying the reverse mortgage loan balance using personal funds, life insurance proceeds, or obtaining financing like a traditional mortgage.
Heirs should contact the reverse mortgage company quickly and provide a clear plan. They may need to prove ownership rights, especially if they weren’t listed on the loan or title. Some heirs may be an eligible non borrowing spouse or non related third party, which affects their options.
The home’s current appraised value is crucial. It determines whether the heir can sell the home to cover the mortgage balance or if the FHA insurance (from the Federal Housing Administration) will cover the shortfall.
If the home’s market value is less than the remaining loan balance, the heir can still sell the home and use the sale proceeds to settle the debt under the 95% rule. If more money is left after the loan is repaid, the heir can keep the remaining equity.
The CFPB’s official rights and responsibilities guide offers detailed guidance on appraisals and heir options.
If the borrower’s estate was handled through a trust or will, the estate attorney will likely be the point of contact with the reverse mortgage lender. The attorney can help:
An estate plan won’t cancel the debt, but it may speed up how the home is handled. This can help avoid delays that trigger foreclosure proceedings.
After the borrower dies or permanently moves out, the clock starts. Here’s a simplified timeline:
Law firms like Stewart Melvin & Frost detail this process, including the 6-month rule and extension options for heirs.
A non borrowing spouse or eligible non borrowing spouse may have special protections. If they meet HUD’s criteria, they may stay in the home after the borrower passes, without needing to repay the loan immediately.
HUD made several changes in 2017 after legal challenges over how spouses were treated. Today, age and other factors are used in the loan terms, and spouses may qualify to remain in the home if they:
You can learn more from HUD’s HECM program page.
If no action is taken within the required timeframe, the lender may:
This process is governed by state law, and the timing can vary. Inaction could lead to the heirs losing the home without any chance to benefit from the home’s equity.
A helpful overview from Harrison Estate Law outlines the timeline, extensions, and what happens if heirs fail to respond.
Yes. Selling the home is the most common solution. The reverse mortgage contract allows the heir to:
Heirs must work with the reverse mortgage servicer and may need to order a new appraisal or provide documentation of the probable selling price.
If the heir is unable to repay the loan or qualify for new financing, they still have options:
This is a good time to speak with a housing counselor. Our article on recovery options after reverse mortgage default explains these solutions further.
No. Because most reverse mortgages are structured as non recourse loans, the heir will never owe more than the home’s market value, even if the reverse mortgage loan balance exceeds it.
If the home sells for less than the debt, FHA insurance covers the difference. Heirs are protected from owing additional money, even if the housing market drops.
This is reinforced in the CFPB’s official rights and responsibilities guide, which clearly states that heirs are not personally liable beyond the value of the home.
Sometimes, a borrower takes out a reverse mortgage loan while an existing mortgage is still in place. The reverse mortgage typically pays off the original loan, but complications can arise if:
In this case, heirs must resolve both debts—the reverse mortgage debt and any other outstanding mortgage balance—before selling or refinancing.
Yes. Heirs can borrow money or obtain financing to repay the loan and keep the property. This usually takes the form of a traditional mortgage or private financing.
The new loan must cover at least 95% of the current appraised value of the home if the reverse mortgage is underwater. This option is common for co borrower heirs or heirs with a strong credit profile and steady income.
Sometimes, the reverse mortgage becomes due and payable before the borrower’s death, usually because of property taxes, homeowners insurance, or leaving the primary residence for too long.
If this happens:
This is an important time to reach out to the reverse mortgage default counseling team at Credit.org for help. Counselors can assist in requesting extensions, explaining loan terms, and preserving the home if possible.
Most reverse mortgages are part of the Home Equity Conversion Mortgage (HECM) program, which is insured by the Federal Housing Administration and overseen by HUD (Department of Housing and Urban Development).
These agencies:
The FHA’s involvement ensures that even if the loan balance is greater than the market value, the heir is not stuck paying more than the home is worth. Learn more from HUD’s HECM program page.
If there was a co borrower or an eligible non-borrowing spouse, they may be allowed to stay in the home even after the borrower passes. This depends on the loan terms and whether the person remaining meets HUD’s criteria. It’s important to know that if the last borrower has died or if the borrower moves out permanently—such as into long-term care—the loan will likely be due and payable.
Heirs don’t have to pay the full reverse mortgage balance. Thanks to FHA rules, they only need to pay off the loan up to 95% of the market value. This option helps heirs who want to keep a home with a reverse mortgage but can’t afford to cover the full outstanding debt. A lump sum or new loan may be needed to cover this amount.
Mortgage insurance is required on all HECM loans. This coverage protects the reverse mortgage heirs by ensuring they’ll never owe more than the home is worth. Even if the loan balance exceeds the home’s principal residence value, the federal housing administration (FHA) steps in to cover the difference.
If heirs don’t want the property, they can let the reverse mortgage lender sell it in a foreclosure sale or sell the property themselves. When property sells, any remaining equity after the loan is repaid goes to the estate. This is especially important if the youngest borrower recently passed away or moved to a care facility.
Some reverse mortgage problems include missing paperwork, short timelines, or poor communication from the reverse mortgage company. Heirs might also face unexpected monthly payments for property taxes, homeowners insurance, or utilities during the process. A good first step is to review the reverse mortgage contract, talk to the property owner’s estate attorney, and request any needed extensions.
No. Heirs do not make interest payments during the life of the loan. However, when the borrower passes away, the total monthly payment amount—including interest—is due. The estate or heirs can cover this by selling the home, refinancing, or using savings.
If you inherit a home with a reverse mortgage:
Remember, you don’t have to go through this alone. Talk to a HUD-certified housing counselor through Credit.org’s reverse mortgage default help.
