The house had a reverse mortgage. Here's your clock.
When the last borrower on a federally insured reverse mortgage dies, and no eligible spouse is still living in the house, the loan comes due. The heirs get three ways out: pay it off, sell the house, or sign it over to the lender. Nobody can make you pay more than the house is worth. The catch is the clock, which runs shorter than most families expect.
These loans are common in California
Most reverse mortgages are Home Equity Conversion Mortgages, or HECMs, insured by the Federal Housing Administration. FHA endorsed 28,149 of them in fiscal 2025, up 6.2 percent from the year before. California is the biggest market by a wide margin, with 27.34 percent of the HECM dollar volume FHA endorsed in fiscal 2025. So if you find a reverse mortgage statement in your parent's folder, you're in plenty of company.
Nationwide counts. FHA's fiscal year runs October through September.
| Fiscal year | Loans endorsed |
|---|---|
| 2015 | 57,989 |
| 2016 | 48,868 |
| 2017 | 55,290 |
| 2018 | 48,329 |
| 2019 | 31,272 |
| 2020 | 41,835 |
| 2021 | 49,196 |
| 2022 | 64,472 |
| 2023 | 32,974 |
| 2024 | 26,502 |
| 2025 | 28,149 |
Source: FHA Annual Report on the MMI Fund, fiscal year 2025, table B-26.
Fiscal 2022 was the high-water mark, with 64,472 loans. Volume fell by about half the next year and has stayed around that level since.
When the loan comes due
The CFPB's page on paying back a reverse mortgage says a HECM has to be paid off when the last surviving borrower or eligible non-borrowing spouse dies, sells the home, or stops living there as a principal residence. HUD's flyer on inheriting a home with a HECM adds two things worth taping to your clipboard. No more money goes out of the loan once it's due. And property taxes and insurance stay the estate's job until title transfers.
That second part catches people. The reverse mortgage never had a monthly payment, so nobody thinks of the tax bill. Keep paying it, and keep the homeowners policy alive.
The clock, step by step
- 30 days
- to tell the servicer what you plan to do once the due and payable notice arrives
- 6 months
- from the death until the servicer has to start foreclosure, unless HUD extends it
- 2 x 90 days
- extensions the servicer can ask HUD for when you are actively selling or paying off
- 95%
- of the appraised value, the most a sale has to bring when the house is underwater
Source: 24 CFR 206.125, HUD Mortgagee Letter 2015-10, CFPB.
The order of events comes from the federal rule at 24 CFR 206.125 and HUD's guidance to servicers.
| Step | What happens | Deadline | Source |
|---|---|---|---|
| 1 | Servicer learns of the death. It can take a phone call from family to start the process | No set date | ML 2015-10 |
| 2 | Servicer reports the loan as due and payable to HUD | Within 60 days | 24 CFR 206.125(a)(1) |
| 3 | Servicer mails the due and payable notice to the estate or heirs | Within 30 days after it notifies HUD | ML 2022-15 |
| 4 | You tell the servicer your plan: pay, sell or deed in lieu | 30 days from the notice | 24 CFR 206.125(a)(2) |
| 5 | Servicer gets an appraisal | Within 30 days of learning of the death, or of your request tied to a sale | ML 2015-10 |
| 6 | Servicer must take the first legal step toward foreclosure | 6 months after the death | ML 2015-10 |
| 7 | If you're actively marketing or refinancing, the servicer can ask HUD for more time | Up to two 90-day extensions | ML 2015-10 |
That last row comes from Mortgagee Letter 2015-10. If you give the servicer evidence that the house is being marketed, or that you're working on a payoff, it can request no more than two 90-day extensions from HUD. The servicer has one more 90-day extension of its own for starting foreclosure, but HUD's letter says that one isn't meant to give heirs more time to sell. So the realistic outer edge, with both extensions approved, is around a year from the death. The CFPB puts it more cautiously on its page for heirs, saying the timeline might be extended up to six months.
One change worth knowing. Before 2022, HUD wanted the notice out within 30 days of the death. Mortgagee Letter 2022-15 moved it to 30 days after the servicer notifies HUD. Add the servicer's 60 days to report to HUD and the letter could, on paper, land around three months after the death. Your 30 days start when it arrives. Don't wait for it. Call the servicer first.
Your four choices
- Keep the house. HUD's flyer and the CFPB both say that to keep it, heirs pay the loan balance in full, with cash or a new loan of their own.
- Sell it. If the house is worth more than the balance, you sell, pay off the loan and the estate keeps the rest. If the house is worth less, you can sell for at least 95 percent of the current appraised value and the lender takes the net proceeds as full satisfaction.
- Sign it over. A deed in lieu of foreclosure hands the house to the lender and ends the debt.
- Do nothing. The servicer forecloses. You still won't owe the shortfall, but you lose any say in the price and the timing.
A wrinkle on choice 1. HUD's flyer says any post-death transfer counts as a sale for the 95 percent rule, and the federal rule says a sale includes a transfer of title by operation of law. That reads differently from the keep-it-at-full-balance line. If a family member wants to buy the house out of the estate, get the servicer's answer on the price in writing before anybody applies for a loan.
The 95 percent rule, worked out
This is a worked example. The appraised value and loan balances are made up to show the math. Your servicer's appraisal and payoff letter set the real numbers.
| Line | Example A: underwater | Example B: equity left |
|---|---|---|
| Appraised value (assumed) | $500,000 | $500,000 |
| Loan balance with interest and insurance (assumed) | $560,000 | $380,000 |
| 95% of the appraised value | $475,000 | $475,000 |
| Lesser of the balance or 95% | $475,000 | $380,000 |
| What the lender must receive | Net proceeds of a sale at $475,000 or more | The full $380,000 payoff |
| Who covers the gap | FHA mortgage insurance covers the $85,000 shortfall | No gap |
| Left for the estate before selling costs and other debts | $0, and nothing owed | $120,000 on an assumed $500,000 sale |
The rule caps what the lender can demand. It doesn't promise the estate any money. In Example A the heirs walk away with nothing, but they don't write a check either.
What you never owe
This is the part to read twice. The federal rule at 24 CFR 206.27 says the borrower has no personal liability for the loan balance, the lender can collect only through sale of the property, and it can't get a deficiency judgment after a foreclosure. The CFPB explains that the rest of the loan is covered by the mortgage insurance the borrower paid for over the life of the loan.
What that means for you: the debt stays with the house. It doesn't move to your bank account or your siblings'. If anyone tells you different, ask them to put it in writing and take that letter to a HUD-approved housing counselor. You can find one through the CFPB's housing counselor search by ZIP code.
If a spouse still lives there
Some couples took out the loan with only one spouse as borrower. The other spouse may get to stay. Under 24 CFR 206.55, an eligible non-borrowing spouse must have been married to the borrower when the loan closed and stayed married for the rest of the borrower's life. They must also have been named as an eligible non-borrowing spouse in the loan documents, and they have to keep living in the house as their main home. While those conditions hold, and the taxes, insurance and upkeep are kept current, the loan's due date is put off.
Two limits. A spouse who wasn't named back at closing can't qualify later. And this deferral applies to HECMs with FHA case numbers issued on or after August 4, 2014. Older loans fall under separate HUD letters, so a surviving spouse on an older loan should call the servicer right away. HUD's 2019 flyer also tells a non-borrowing spouse to send the lender a certification within 30 days of the borrower's death.
What to send the servicer
- A certified death certificate. The servicer can start on a phone call, but it needs the paper eventually
- Your letters from the probate court, or the trust documents showing who the successor trustee is
- One name and phone number for the person handling the house, so the servicer isn't calling five cousins
- A written request for the appraisal and a current payoff figure
- Proof that the house is on the market, if you'll need an extension. Ask the servicer exactly what it accepts
- Proof that property taxes and insurance are paid
FHA's Resource Center answers questions at 800-225-5342.
Selling inside the window
If listing and waiting for a buyer won't fit inside six months, some families look at selling for cash. In that case, get a written cash offer on the house so you have a real number to hold against the payoff letter and the 95 percent figure, instead of a guess. Before you sign with any buyer, have them explain how the sale actually happens. 916 Home Offer, a Sacramento company that buys houses as-is, lays out the three steps of a cash sale on its site, and anybody else you talk to should be able to explain theirs just as plainly. Run the contract past the estate's attorney before signing. The servicer's payoff letter, the title company and, if there's a probate case, the court all come into a sale like this.
Find the servicer's name on the last statement in your parent's folder and call this week. The servicer's 60 days to report the loan to HUD run from the day the loan came due, which for most families is the day of the death, and you'd rather be the one who calls first.