Selling a House With a Reverse Mortgage After the Owner Dies

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

When the last borrower on an FHA-insured reverse mortgage (a HECM) dies, the loan becomes due and payable. The estate or heirs can pay it off and keep the home, sell it, or hand it back to the lender with a deed in lieu of foreclosure. If the home is worth less than the loan, HUD rules let the heirs sell for at least 95% of the current appraised value, and the loan is non-recourse, so the heirs don’t owe the shortfall. Call the loan servicer right away, because the clock starts with the servicer’s notice, and extensions depend on showing you’re actively selling or paying off the loan.

This guide covers HECMs, the most common reverse mortgage. Proprietary ("jumbo") reverse mortgages follow their own loan documents. It’s general information, not legal advice. Talk with the estate’s attorney about probate or trust questions.

What happens to a HECM when the borrower dies

HUD’s rules for HECMs are in 24 CFR Part 206. Under 24 CFR 206.27(c)(1), the balance becomes due when a borrower dies and the home isn’t the principal residence of at least one surviving borrower. Repayment can be deferred for an Eligible Non-Borrowing Spouse who meets HUD’s requirements. HUD’s guide for heirs says a non-borrowing spouse must give the lender a Non-Borrowing Spouse Certification within 30 days of the last borrower’s death, among other requirements.

The process under 24 CFR 206.125 runs roughly like this:

1. Servicer notifies HUD, then notifies the borrower’s estate and heirs.
2. The estate and heirs have 30 days from that notice to choose a path: pay the balance, sell, deliver a deed in lieu, or take another action HUD allows.
3. Extensions. HUD’s heirs guide says the lender may approve 90-day extensions when the estate or heirs show satisfactory documentation that they’re actively trying to sell or repay. The servicer and HUD decide how many are allowed and on what terms.
4. Foreclosure deadline. The servicer must start foreclosure within six months of the due date unless HUD approves more time.

The estate is responsible for property taxes and insurance until title transfers, according to HUD’s heirs guide. Keep them current. A lapse can create a separate problem with the servicer and the county.

Key HECM rules for heirs

Your options as heirs

1. Pay off the loan and keep the home

You can pay the full balance (principal, accrued interest, mortgage insurance premiums and servicer advances) from estate funds, a new mortgage or your own money. Ask the servicer for a written payoff figure. HUD’s heirs guide says the full balance must be paid to keep the home.

2. Sell the home

If the home is worth more than the loan, you sell at market, the loan is paid from escrow, and the rest goes to the estate or trust. This is a normal sale. Our probate sale and trust sale guides cover who signs and what approvals are needed.

3. Sell for 95% of appraised value when the loan is larger than the value

If the loan balance is more than the home is worth, the 95% rule applies. You can sell for at least the amount HUD sets, which can’t be more than 95% of the current appraised value, and the net proceeds satisfy the loan. HUD’s heirs guide says the lender accepts those net proceeds in full satisfaction.

A few practical points:

• The appraisal sets the floor. Under 206.125(b), the servicer orders the appraisal through an FHA roster appraiser. If you think it’s off, raise it with the servicer quickly, with comparable sales.
• Get the servicer’s sign-off on the deal. Send the purchase contract and estimated closing statement before you open escrow, and confirm the minimum net figure in writing.
• The mortgage is released at closing. Under 206.125(c), the servicer must release the mortgage to complete a qualifying sale, as long as there are no junior liens other than any HUD-required second mortgage and all net proceeds go to the servicer. Any other liens need their own payoffs. See our guide to selling a house with liens.

4. Deed in lieu of foreclosure

If no one wants to sell or keep the home, the estate can sign the property over to the servicer. Under 206.125(f), the servicer must accept a deed in lieu recorded within 9 months of the due date if it can get good and marketable title. In exchange, it cancels the note and satisfies the mortgage. HUD may offer a cash-for-keys incentive when the deed is recorded within 6 months.

Non-recourse: the shortfall isn’t yours

Under 24 CFR 206.27(b)(8), the borrower has no personal liability for the balance, and the servicer can’t get a deficiency judgment. The debt is collected only from the property. For the estate, that means the worst outcome is losing the home, not owing money beyond it.

How a California probate or trust sale fits the HECM timeline

The HECM clock and the California estate process run at the same time, and they don’t wait for each other.

• Who can talk to the servicer. The servicer will want proof of authority, such as letters testamentary or of administration in probate, or a certification of trust and death certificate for a trust. Get that paperwork moving first.
• Probate can take longer than 30 days. Opening probate and getting letters takes time. Tell the servicer early that a personal representative is being appointed, and ask what documentation it needs to support an extension.
• Court confirmation adds time. If the sale needs court confirmation, the confirmation hearing and possible overbids add weeks. See our court confirmation and overbid guide.
• Trust sales skip probate court. A successor trustee can often list sooner, but should still document every step for the servicer.
• Valuation matters twice. The HUD appraisal sets the 95% floor, and a date-of-death valuation matters for the estate’s tax basis. They’re different reports for different purposes.
• Disclosures. Many fiduciary sales are exempt from the Transfer Disclosure Statement under Civil Code §1102.2, but not all. A natural-person trustee of a revocable trust who lived in or owned the home within the past year isn’t exempt.

If several heirs disagree about whether to keep or sell, the servicer’s deadlines keep running. Our article on co-owners who disagree about selling an inherited house and our partition action guide explain the options. For a broader overview, see selling an inherited house in California.

A 30-day checklist for heirs

1. Notify the servicer of the death in writing and ask for the payoff amount and the HECM due-and-payable letter.
2. Confirm who has legal authority (executor, administrator or successor trustee) and start the paperwork.
3. Secure the home, keep insurance active and pay the property tax installments.
4. Decide whether to keep, sell, or deed back the home. Ask the servicer to order the HUD appraisal if you may sell below the balance.
5. If you’re selling, list the home and send the servicer the listing agreement and marketing records to support an extension request.
6. Keep copies of every letter, email and call log.

Buying with a reverse mortgage instead

Some older buyers use a HECM to buy their next home. That’s a different program with its own rules. See our guide to HECM for Purchase in California.

Diamond’s probate and trust sales team works with executors, trustees and heirs on reverse-mortgage properties across our service area. Contact us to talk through timing and pricing.

Questions people ask

How long do heirs have to sell a house with a reverse mortgage?

Under 24 CFR 206.125, heirs have 30 days from the servicer’s due-and-payable notice to choose a path. HUD’s heirs guide says the lender may approve 90-day extensions with documentation of active sale or payoff efforts. The servicer must start foreclosure within six months of the due date unless HUD approves more time.

Do heirs have to pay back a reverse mortgage out of pocket?

No. A HECM is non-recourse under 24 CFR 206.27(b)(8). The debt is collected only from the property, and heirs aren’t personally liable for any shortfall. To keep the home, though, the full balance must be paid.

What is the 95% rule for reverse mortgages?

When the loan is due, heirs can sell the home for at least the amount HUD sets, which can’t exceed 95% of the current appraised value. The net proceeds satisfy the loan even if they’re less than the balance.

Who orders the appraisal for a HECM sale?

The servicer orders it from an FHA roster appraiser within 30 days of a sale-related request, under 24 CFR 206.125(b). When the loan is due and payable, the servicer pays and may be reimbursed from sale proceeds.

Can the surviving spouse stay in the home?

A surviving spouse who is also a borrower can stay, and the loan doesn’t come due. A spouse who isn’t on the loan may qualify as an Eligible Non-Borrowing Spouse. HUD’s heirs guide says that spouse must give the lender a certification within 30 days of the death, plus meet other requirements.

What if we just want to give the house back?

The estate can offer a deed in lieu of foreclosure. The servicer must accept one recorded within 9 months of the due date if it can obtain good title. HUD may offer a cash-for-keys incentive if it’s recorded within 6 months.

Does probate stop the reverse mortgage clock?

No. The HECM timeline runs alongside probate. Tell the servicer early that a personal representative is being appointed, and ask what it needs to support an extension.

Sources & notes

1. 24 CFR 206.27: non-recourse (b)(8); due-and-payable conditions (c). Official text on eCFR; reviewed via Cornell LII.
2. 24 CFR 206.125: notice, 30-day options, 95% sale rule, 11% closing cost cap, appraisal, foreclosure timing, deed in lieu.
3. HUD, Inheriting a Home Secured by an FHA-Insured HECM (September 2019): heirs’ options, 90-day extensions, non-borrowing spouse certification, taxes and insurance.
4. Civil Code §1102.2: TDS exemptions for fiduciary transfers.
5. HUD’s dollar cap on closing costs for 95% sales is set by Federal Register notice. Ask the servicer for the current figure. Proprietary reverse mortgages aren’t covered by these HUD rules; check the loan documents.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

Related: Selling a house in probate · Selling a house in a trust · Inherited house guide · HECM for Purchase