When a parent passes and there’s a reverse mortgage on the house, the first thing that usually shows up is a letter from the servicer. Don’t panic and don’t toss it. That notice is the servicer telling you the loan is now due and payable because the last borrower has died. It’ll generally explain what they need from you and what your options are. Read it carefully, keep it, and if anything in it is unclear, call the servicer and ask them to walk you through it. You can also get the letter reviewed by a HUD-approved housing counselor, which is free or low cost, and that’s often the calmest first step.
The due and payable process is basically the lender saying the loan has to be settled. In general terms, the estate or the heirs have some time to decide what to do, and the servicer will typically want to know your intentions. The exact timing and requirements depend on the situation, so don’t assume a number you heard from a neighbor applies to you. This is where a lawyer who handles estates and real estate, or a CPA, can help you understand where you stand. The county can also point you toward resources for heirs and estate matters.
You’ve got a few practical paths. You can buy the house by paying off the loan, usually at a amount that’s less than the full balance if the home is worth less, but that depends on the loan terms and the situation, so confirm it with the servicer and a professional. You can sell the house and use the proceeds to pay what’s owed, with anything left over going to the estate. Or you can hand the house back to the lender, which is often called a deed in lieu, and walk away from the property. Each choice has consequences for the estate and for you, and none of them should be made on a guess.
Keep the house insured, keep it secure, and keep paying whatever utilities and taxes you’ve been handling so it doesn’t create new problems. Talk to the servicer in writing where you can, and keep copies. If the situation is complicated, like multiple heirs or a house that needs work, get a lawyer involved early. And remember the county and a HUD-approved counselor are there to help you sort through it without pressure.
A closer look is at a reverse mortgage house after a death.
