Houston Estate Planning and Elder Law Attorney Blog
A reverse mortgage comes due when the last borrower dies, and the house passes to the family with the loan still attached. For the federally insured version, the home equity conversion mortgage, federal rules set short deadlines for the family to act. Heirs who do not know those deadlines can lose options they never realized they had.
After the last borrower dies, the lender notifies the estate and heirs that the loan is due. The regulations then give them 30 days from that notice to pay the balance, sell the home, or deed it to the lender. Under 24 C.F.R. § 206.27(b)(8), no one is personally liable for any shortfall, because the lender can collect only through the property. McCulloch & Miller helps families in Dallas and across Texas through the probate steps that usually have to happen before a sale can close.
When a Reverse Mortgage Comes Due After Death
A home equity conversion mortgage is a federally insured reverse mortgage under which the lender may enforce the debt only through sale of the property, not against the borrower personally.
Under 24 C.F.R. § 206.27(c)(1), the loan becomes due and payable in full when a borrower dies and the home is not the principal residence of at least one surviving borrower. A spouse who signed the loan as a borrower can keep living there without the loan coming due, as long as the home remains that spouse’s principal residence.
A spouse who was not a borrower is in a different and narrower position. The regulations provide a Deferral Period for an Eligible Non-Borrowing Spouse, which postpones the due date only while specific conditions continue to be met. The loan documents and those conditions govern that case, and it should not be confused with the heirs’ situation described below.
The Heirs’ Options in the 30-Day Window
The lender must notify HUD within 60 days after the loan comes due on a death, and then notify the borrower’s estate and heirs within 30 days after that. Under 24 C.F.R. § 206.125(a)(2), the family then has 30 days from the date of the notice to choose among these paths:
- Pay it off: repay the outstanding balance in full, including accrued interest, mortgage insurance premiums, and lender advances.
- Sell the home: sell for at least the amount HUD sets, which may not exceed 95 percent of the appraised value, with the net proceeds going toward the balance.
- Deed it to the lender: give a deed in lieu of foreclosure.
When the loan is due, the lender pays for the appraisal used to price a sale and may recover the cost from the proceeds. That minimum price cannot exceed 95 percent of the appraised value, so a family can sell an underwater home without first raising the full loan balance.
If that describes your situation, call McCulloch & Miller at (713) 333-8900 to set up a time to talk.
Why the Heirs Do Not Owe the Shortfall
Texas law vests a decedent’s estate immediately at death in the beneficiaries of a will, or in the heirs where there is none, under Estates Code § 101.001. Under § 101.051, it vests subject to the payment of the decedent’s debts. The reverse mortgage is one of those debts, but its own terms limit how it can be collected.
Section 206.27(b)(8) provides that the borrower has no personal liability for the loan balance. The lender enforces the debt only through sale of the property and may not obtain a deficiency judgment if it forecloses. The heirs’ own savings and property are not on the line for the difference between the loan and what the house brings.
Getting Legal Authority to Sell in Dallas County
A sale has to be made by someone with legal right to dispose of the property, and a buyer’s title company will want to see that authority. When the parent left a will, that usually means admitting it to probate and obtaining authority for an executor, which in Dallas County happens in one of the Dallas County Probate Courts. Where there is no will, heirship has to be established before title can pass cleanly.
That work competes with the federal clock. Under § 206.125(d)(1), the lender must begin foreclosure within six months of the due date unless HUD approves additional time. Opening the probate early leaves room for the family to choose a sale rather than accept a foreclosure. The firm handles that sequence within the Texas probate process for families who live near the home and for those managing it from out of town.
Questions Heirs Ask About Reverse Mortgages
Can the Heirs Keep the House?
Yes, by paying the outstanding balance in full, including accrued interest, mortgage insurance premiums, and any lender advances. Some families refinance into a conventional mortgage to do it.
What if the House Is Worth Less Than the Loan?
The heirs can sell for the amount HUD sets, which cannot exceed 95 percent of the appraised value, and the lender cannot pursue them for the rest. They can also give the lender a deed in lieu of foreclosure.
Does a Spouse Who Was Not on the Loan Have to Move Out?
Not necessarily. A qualifying non-borrowing spouse may be able to remain under a Deferral Period, but only while specific federal conditions continue to be met. The loan documents set the terms.
Acting Before the Deadlines Close In
The first notice from the lender starts a short clock, and the probate steps needed to sell usually take longer than the family expects. Opening the estate promptly keeps the choice between paying, selling, and deeding the house in the family’s hands. To go through your situation with the firm, call (713) 333-8900 or send a message through the contact page. Flat fees are available for much of this work.