Reverse Mortgage Heirs Guide: What Happens After Death

A plain-English walkthrough for family members handling a HECM after a parent or spouse passes away — timelines, the 95% rule, and the federal protections that keep you from inheriting debt.

The short answer

A Home Equity Conversion Mortgage (HECM) becomes due and payable when the last surviving borrower dies. Heirs have four options: sell the home, refinance into a traditional mortgage, pay off the balance, or sign a deed-in-lieu of foreclosure. The loan is non-recourse, so heirs never owe more than the home is worth — even if the balance exceeds market value.

The timeline at a glance

• Within 30 days of death: Notify the loan servicer. They mail a "Due and Payable" letter explaining your options.
• Within 6 months: Decide on an option (sell, refinance, pay off, or deed-in-lieu) and begin acting on it.
• Two 90-day extensions: If actively marketing the home or arranging financing, you can request up to two 90-day extensions — extending the total window to 12 months.

The 95% rule, explained

If heirs want to keep the home and the HECM balance is higher than the home's current value, HUD lets them satisfy the loan by paying 95% of the current appraised value. FHA mortgage insurance covers the difference between that payment and the actual loan balance.

Non-recourse protection

• The home is the only collateral.
• Heirs are never personally liable for a shortfall.
• Other estate assets (savings, investments, other property) cannot be pursued to make up a deficit.
• If the home sells for less than the balance, FHA insurance pays the lender the difference.

What if heirs want to sell?

List the home as you normally would. At closing, the HECM is paid off from the sale proceeds. Any remaining equity belongs to the estate.

What if heirs want to keep the home?

Heirs can pay the loan off with cash, refinance into a traditional mortgage in their own name, or — if the home is worth less than the balance — invoke the 95% rule.

Common pitfalls to avoid

• Ignoring servicer mail. Missed deadlines are the most common reason families lose flexibility.
• Assuming you owe the debt personally. You don't. The non-recourse rule is statutory.
• Letting the home deteriorate. Hazard insurance and property taxes must stay current during the resolution window.

Where to get help

Start with the loan servicer (their number is on every monthly statement). For independent guidance, contact a HUD-approved housing counselor — counseling is low-cost or free and not tied to any lender.