Non-Recourse Reverse Mortgage Protections Explained

December 27, 2024

The non-recourse feature of reverse mortgages is a powerful safeguard, yet it’s often misunderstood. It’s even sparked debates—like the AARP lawsuit against HUD—over its scope.

Simply put, a non-recourse reverse mortgage ensures you’ll never owe more than your home’s value when the loan matures. But how does this protect you and your heirs? Let’s break it down.

Table of Contents

• How Non-Recourse Protection Works

• The AARP Lawsuit and HUD Policy Shift

• Why Non-Recourse Matters

• Amortization Example of Interest Owed

• Top FAQs

How Non-Recourse Protection Works

Picture this: A 66-year-old homeowner with a $500,000 home secures a $321,000 fixed-rate reverse mortgage. After 20 years of no payments, interest pushes the balance to $1,000,000. The home’s value could rise, fall, or stay flat—say it’s worth $500,000 when the loan matures. Here’s where non-recourse kicks in:

If the home’s worth $1,000,000+: Heirs can sell, pay off the loan, and keep the excess—or refinance to retain it.
If it’s worth $500,000: Heirs can sell, refinance, or walk away. The lender caps repayment at $500,000—no chasing the estate for the rest. HUD’s insurance covers the lender’s loss.

This cap guarantees peace of mind, no matter the market.

The AARP Lawsuit and HUD Policy Shift

Before 2008, non-recourse applied universally—capping debt at the home’s value for sales or refinances. HUD’s Mortgagee Letter 2008-38 limited it to sales only, forcing heirs to pay full balances (e.g., $600,000 on a $500,000 home) to keep the property. AARP sued, arguing this gutted protections. HUD’s 2011-16 letter reversed course, restoring the original intent. Now, your debt is capped at the home’s value, period. HUD’s Mortgagee Letter 2008-38 clarified and initially changed the implementation of the Non-Recourse feature. However, this led to controversy and a lawsuit from AARP.

Why Non-Recourse Matters

This feature is the backbone of HECM reverse mortgages, offering:

Feature	Protection	What It Means for You
Debt Limit	Never owe more than home’s value	Loan capped at appraised value (e.g., $500K max)
Heirs’ Liability	No risk to heirs or estate	Pay only home’s value or walk away—no extra cost
Lifetime Use	Live in home as long as you want	Stay past 100 if taxes/insurance are paid
FHA Insurance	HUD covers lender losses	Your funds are secure, balance doesn’t matter
Notes: Applies to HECM loans. Updated for 2025 terms.

Amortization Example of Interest Owed

Curious how non-recourse fits your plan? Contact All Reverse Mortgage for a free, personalized consultation—America’s top-rated lender (4.99/5 stars). Call (800) 565-1722 or click here—no obligation, fully secure!

Top FAQs

What Happens If the Reverse Mortgage Balance Exceeds the Property Value?

If your reverse mortgage balance surpasses the value of your property, it doesn’t impact your loan status. As long as you continue living in the home and meet your obligations, such as maintaining taxes, insurance, and property upkeep, your loan remains in good standing. Additionally, any available funds in your line of credit can still be accessed.

If the last surviving borrower leaves the home permanently and the loan balance exceeds the property value, the estate is not responsible for the shortfall. Thanks to the loan’s non-recourse feature, you or your heirs can never owe more than the property’s value at the time of sale.

For Home Equity Conversion Mortgages (HECMs), the Federal Housing Administration (FHA) Mortgage Insurance Fund covers any losses to the lender, ensuring no additional burden on the borrower or their heirs.

What Happens If I Live Beyond 100 Years Old?

Reaching 100 years of age or older has no impact on your reverse mortgage. Many people ask about this due to the actuarial tables for life expectancy and loan-to-value ratios, which stop at age 99. However, your reverse mortgage remains valid as long as you continue to:

Occupy the property as your primary residence.
Pay property taxes and homeowners insurance on time.
Maintain the home in good condition.

As long as these requirements are met, your reverse mortgage loan will stay in good standing, regardless of your age.

If I Borrow Too Much, Can the Bank or Servicer Go After My Heirs or Other Assets?

No, this cannot happen. A reverse mortgage is a non-recourse loan, meaning you can never borrow “too much.” The lender’s only security for repayment is the home itself. They cannot pursue your heirs or your estate for additional funds, regardless of the loan balance.

This protection ensures peace of mind for borrowers and their families. The maximum repayment is capped at the value of the home when it is sold, with any shortfall covered by mortgage insurance in the case of federally insured reverse mortgages.

How Do You Get Out of a Reverse Mortgage That Is Upside Down?

If your reverse mortgage balance exceeds your home’s value, there’s no need to leave the home voluntarily. You can continue living there as long as you meet the loan’s requirements, such as maintaining it as your primary residence and keeping up with taxes and insurance.

When you eventually vacate the home—whether due to moving into assisted living or other reasons—you must notify the lender. At that point:

If your heirs want to keep the property: They can pay off the loan at 95% of the home’s current appraised value, regardless of the loan balance.
If your heirs don’t want the property: They can allow the lender to foreclose, or you can deed the home back to the bank if the title is clear.

In either scenario, the reverse mortgage’s non-recourse feature ensures that no additional repayment can be sought from your heirs or other assets. The home itself is the only collateral for the loan.

If I Do a Deed in Lieu of Foreclosure on a Reverse Mortgage, Will It Ruin My Credit?

In most cases, a Deed in Lieu of Foreclosure on a reverse mortgage does not impact your credit. Lenders typically do not report reverse mortgages to credit bureaus, and these transactions often occur at the end of the loan when borrowers transition to assisted living or other care, making credit less relevant.

However, if you choose a Deed in Lieu of Foreclosure early—simply because you no longer wish to stay in your current home—and later apply for financing on another property, the impact on your credit may vary. Future lenders might consider this decision differently, as there is no standardized way they evaluate such scenarios. It’s advisable to consult a financial advisor or lender for guidance if you’re concerned about potential future financing needs.

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29 Comments on this Article

Rodney
March 19th, 2024

We are five years into a reverse mortgage and hired a dishonest contractor who took our money and left the interior of the house with approximately $100,000 to $150,000 in damage. We cannot borrow enough to repair everything, so we are considering walking away. Can we transfer the deed and not be held responsible for the damage caused by the contractor? Essentially, we want to walk away cleanly to start over.
Reply to Rodney
- Michael Branson
  March 21st, 2024
  
  Hi Rodney,
  Your loan documents stipulate that you agreed not to make substantial changes to or lay waste on the property. Under normal circumstances, I understand that you could walk away from the loan, and return the keys to the lender, and the primary repercussion would be a potential ban from HUD or government programs until any losses were repaid, should you leave home for reasons other than death or medical necessity before being compelled to do so. However, your specific situation's outcomes are uncertain to me. If you're considering such a decision, I recommend contacting the lender to discuss your options and consulting with an attorney to understand what the lender might do and what actions you might legally take under these circumstances.
  I cannot offer legal advice, nor do I know anyone personally who has faced this situation, so I cannot provide a real-world example of the outcomes. After speaking with the lender and your attorney, you will have more information to help you make an informed decision.
  Reply to Michael
Cathy
July 8th, 2023

Hello ARLO,

I am an only child, and my dad did a Reverse Mortgage, and he passed away in March. I have been trying to work with HUD Comp-U-Link. They have been hard. He owes more than the home is worth. I am fixing to tell them to go ahead and foreclose on the house. Can they come after me trying to get me to pay? I did not sign the loan. He has nothing but the house. I have been paying the Homeowners insurance with his little money. I will send them a letter telling them the house is empty and for them to foreclose on it. I am going to stop paying the Homeowners Insurance.
Reply to Cathy
- Michael Branson
  July 8th, 2023
  
  Hello Cathy,
  The reverse mortgage is non-recourse, which means neither the lender nor HUD can ever go after any other assets of the borrower or their estate for repayment of the loan other than the property. And you are correct in that you never agreed to pay one red cent, so they had no agreement with you to pay anything even if the loan was not a non-recourse debt. You are within your rights to contact the lender at any time and advise them you will not be repaying the loan and that they should begin the foreclosure proceedings without delay as the home is abandoned and is not secure.
  Reply to Michael
Larry
January 20th, 2023

My Blind Mother was required to obtain a POA due to her blindness to take out a Reverse Mortgage... Day of closing the Reverse Mtg paperwork was wrong the closing agent came back and closed the loan without the Blind mother's POA. The judge said she was competent even though the MTG co thought she wasn't requiring Mother to obtain Dr notes POA paper requirements and other financial requirements for the POA to sign documents. We fought in court they got judgment... but their judgment says all Defendants which are heirs must pay any deficiencies. A non-recourse loan and HUD letters specifically speak volumes about nonrecourse and a lender can only go after collateral. I called HUD and they told me it's up to the Attorney and their servicer... How can they go after the heirs for a deficiency and how can hud leave it up to the lender when the MTG insurance takes care of all deficiencies?
Reply to Larry
- Michael Branson
  January 22nd, 2023
  
  Hello Larry,
  Blindness does not equate to incapacitation. While accommodation must be made for blind borrowers, a POA is not required unless the borrower also lacks capacity. When you say you fought in court and the judge made a ruling though that all defendants must pay based on the court ruling, I honestly cannot comment on the circumstances.
  A reverse mortgage is a non-recourse loan, and it is specifically spelled out as such in the loan documents. Furthermore, I'm not aware of any circumstances where non-borrowers can be held liable for any portion of a debt for which they never signed a promissory Note agreeing to accept responsibility for that debt whether the loan was recourse or not.
  Simply put, if you never agreed to repay a loan by signing on the dotted line, the lender cannot look to you and ask you to pay any of your relatives' debts. I can't help but think there is something there is some piece of the puzzle missing here. Most reverse mortgages go through a non-judicial foreclosure if that is required, and the lender would receive the property through a Trustee's Deed upon Sale if no one out bid the lender's opening bid.
  And yes, the lender would then make a claim to FHA/HUD for repayment of any losses. I can't for any reason think of why there would be a reason to go through a court foreclosure or that the Court would order heirs to make any payments unless the lender or court felt that there was wrongdoing on the part of those heirs that resulted in heavy losses.
  I've heard that lenders and HUD may begin cracking down on borrowers and heirs who falsify documentation when the borrower(s) don't really live in the property and rent it out instead creating excessive losses for the insurance fund, is that what happened here? Because if not, there should be no recourse to heirs or even to mom's estate. If there was any wrongdoing, that would be a different issue and would not shield people from legal judgments or even prosecution.
  Reply to Michael
Anthony B.
March 2nd, 2022

If I have a reverse mortgage one property but I own two, in the case of my death will the lender take the other house as well?
Reply to Anthony
- Michael Branson
  March 2nd, 2022
  
  Hello Anthony,
  
  Not only can the lender NOT touch any other property you own, they cannot look to any other assets you or your heirs or your estate have to repay the obligation. The property is the sole security for the loan. And by the way, the lender does not automatically get this house either.
  Your heirs have the option to keep the home by paying off the existing loan or 95% of the current market value, whichever is less; or they can sell the property to keep the equity if the home is worth more than is owed on it or they can simply walk away and let the lender take the home but the lender is not the entity that has the choice - your heirs have that choice.
  But as I said, the lender cannot look to any other assets to repay the obligation so your other property is never in jeopardy of being taken as repayment of your reverse mortgage.
  Reply to Michael
Wanda
November 26th, 2020

My mother is now living with me and I am also her legal guardian because she has advanced dementia due to Alzheimer's. She is still legally married, and my stepfather is still living in their house. He is unable to care for her due to his declining health. They took out a reverse mortgage years ago and are upset down on the loan. They have already been paid for whatever equity they had so they are no longer receiving monthly payments from the mortgage company. I am thinking about taking my mom off the title because I do not want her to have any liability associated with the house. Can or should I try to take her off the mortgage as well or should I leave things alone. I do not get along with my stepfather and he doesn't even call for her anymore. I just do not want my mom to have any liability or legal responsibilities tied to the house if he dies before her especially since it will fall on me to take care of.
Reply to Wanda
- Michael Branson
  November 26th, 2020
  
  Hello Wanda,
  
  I cannot advise you on legal matters with regard to any potential liability from property ownership.
  For that advice, you really should seek the counsel of an attorney.
  I can tell you that as far as the loan is concerned, it is a non-recourse loan which means it has no personal liability and the lender can never seek repayment from your mom, they have only the property to look to for repayments.
  So as far as the loan is concerned, she has no personal liability.
  Which is a good thing because I do not believe just signing a Deed to remove her name from the title now would not have eliminated her contractual obligations to which she agreed when she signed the legal documents.
  The attorney can advise you though whether it is necessary or advisable.
  Reply to Michael
Kayla L.
September 20th, 2020

Hi Arlo,

My 86-year-old father has a reverse mortgage. He may need to move out of state to live with me due to health issues. He is concerned that he has been unable to maintain the upkeep on the home. If there is no equity and the home is worth less than the loan, can they force him to pay for repairs?
Reply to Kayla
- Michael Branson
  September 20th, 2020
  
  Hello Kayla,
  
  The reverse mortgage is a non-recourse loan.
  The lender and HUD will not look to your father to make up any shortfall once the property is sold to repay the loss.
  Reply to Michael
Barbara E.
March 9th, 2020

I once read that in a reverse mortgage case in which the owner received all of the house's value before dying, and the lender is now demanding repayment in full, that the executor of the property can become the owner if the lender demands far more repayment than it loaned the deceased and also far more repayment than the property's assessed value. Is this true? By what law or ruling? Thank you.
Reply to Barbara
- Michael Branson
  March 9th, 2020
  
  Hello Barbara,
  
  I sure wish I could see the article so I could address them directly. Not only is that blatantly false, the loan documents specifically state that the loan is a non-recourse loan and that the only security the lender has is the property itself.
  The lender cannot seek repayment from any other assets and if they are claiming that the heirs can become liable, again, that is just false.
  The heirs never signed any agreement to pay anything so how could a lender enforce an agreement on someone who never signed that agreement?
  The heirs can walk away and let the lender take the property and owe nothing or they have the option keep the home and repay the amount owed or 95% of the current appraised value, whichever is less.
  
  This is a case of whoever wrote the article you read was not even close to accurate about the program. Borrowers pay mortgage insurance that ensures they will always receive the money they are entitled to receive and that their heirs will never have to pay any shortfall on the loan.
  It does not happen as often as it used to, but we still see articles written by people who have no idea how the program works and it's a real shame that they spread so much misinformation.
  Reply to Michael
Michelle D.
February 7th, 2020

My mother's reverse mortgage was underwater when she died. I let the lender foreclose and sell the property without contest. I thought that was the end of it. Now the lender has sent the estate a Form 1099-A showing the $42,000 difference between the debt and the value of the home. I understand that the estate doesn't owe the lender the $42,000, because the reverse mortgage was a nonrecourse loan, but the implication of sending the 1099-A is that the estate will owe the IRS tax on that amount. I've already distributed all the assets of the estate to the two heirs (myself and my brother). However, the estate is still open pending the conclusion of a lawsuit in which the estate is the plaintiff. Are the heirs going to be on the hook for tax on that $42,000?
Most of the estate assets were distributed to the heirs in 2018. A Form 1041 was filed for 2018.
The remainder of the estate assets were distributed in 2019. The reverse-mortgaged property was sold by the lender in 2019. Will I now need to file a Form 1041 for 2019 as well and report income of $42,000? If I don't have to report the $42,000, then the estate's income for 2019 will not meet the minimum threshold for requirement to file.
Reply to Michelle
- Michael Branson
  February 10th, 2020
  
  Hello Michelle,
  We are restricted by law from giving legal or accounting advice. There is so much to consider when a home is sold that must be determined by your accountant or tax adviser and that may change based on filing status, gains, and other circumstances. I would not even suggest which filings to use as it would not only violate the terms of my licensing, but since I don't know everything needed, I would not be the one from whom you should take this advice. I would strongly suggest that you seek the advice of a competent tax professional.
  Reply to Michael
Isabel S.
September 18th, 2019

My mother has a reverse mortgage. The loan exceeds the value of the house. If she must move to a nursing home can the bank garnish her social security check to pay back the loan?
Reply to Isabel
- Michael Branson
  September 18th, 2019
  
  Hello Isabel,
  The reverse mortgage is a non-recourse loan. No matter what the balance is or the value, the lender can never seek repayment from any other asset than the home. So, to answer your question directly, no, the bank can never garnish your mom's check nor can they force payment from funds in the bank or anything else. Foreclosure of the property is their only option.
  Reply to Michael
Michael B.
August 8th, 2019

I am living in my parents' house who both died a year and a half ago. I've been in the house not paying rent. The house went for foreclosure on March 17th, 2019, I still have nowhere to live. I can't afford to rent anything; my credit is bad. it is now August 5th 2019 I've gotten three different letters asking me to go to court. I didn't go because the house is not in my name. I just stayed here to help my parents for 5 years ..I don't know where to live.. do I have to pay back all this money? Because I haven't paid any rent since I've been here. I just pay the utilities can they come after me for the back payment of rent? They are charging my parents $40 a day. My name is not on the lease my name is not on anything but, both my parents are gone. Can the bank come after my vehicle that I just bought for my job?
Reply to Michael
- Michael Branson
  August 8th, 2019
  
  Hello Michael,
  
  The loan is a non-recourse loan which means the lender cannot seek repayment from any other assets from your parents' estate or from you. You need not worry about having to repay any of the obligation, but you do have to worry about finding a place to live as that will not be much longer if the foreclosure started in March.
  Reply to Michael
Lewis G.
June 10th, 2019

Just found out father has taken lump some on reverse mortgage. He has much younger girlfriend since mom passed away a few years ago. He has no money left on this reverse mortgage. No one in family wants house so if he does decide to leave his house to girlfriend would any other family members need to be involved? What happens if he should leave house to me. I am responsible to pay reverse mortgage before I could sell it , correct?
Reply to Lewis
- Michael Branson
  June 10th, 2019
  
  Hello Lewis,
  
  The reverse mortgage is a loan just like any other loan. To sell the property, you or anyone else would find a buyer and enter into an agreement to sell. Once you were ready to close the transaction, your title company or other settlement provider would send a request for Beneficiary's Demand to the lender from which the provider could send in the payoff funds to clear the lien so that the new owner would have clear title subject only to whatever liens/loans they used to purchase (if any).
  It would not have to be done "before" you sell the house, as with most all transactions, it would probably be a simultaneous procedure.
  Reply to Michael
Nicole D.
June 10th, 2019

Hello. Mom died in March and her condo was substantially underwater. It was in Illinois, but I moved her to Minnesota in September so I could care for her. During that time, her HOA dues lapsed, as she had to pay for medical and nursing home cares. Now her HOA is suing me for these monies. Am I correct that it is the new owner of the home - i.e., the reverse mortgage bank who holds the lien - who is now responsible for these debts? Mom died without assets or a will and had indicated that she wanted her condo to go back to the bank when she passed.
Reply to Nicole
- Michael Branson
  June 10th, 2019
  
  Hello Nicole,
  
  It's not quite that simple. Did you Deed the property back to the lender? You said that you moved her back to Minnesota in September, but did you contact the lender before or after and plan to transfer the title? The reverse mortgage is a non-recourse loan and the lender will never seek repayment for the loan from any other assets.
  But unless you and mom decided to transfer ownership of the condo to the lender, or there has been a foreclosure, she or her estate still owns the unit. No matter how much the balance of the loan exceeded the value of the unit, heirs can never be made to pay a deficiency balance on a reverse mortgage. The condo HOA is different issue to which I cannot speak.
  
  The HOA, any insurance claims or other obligations mom had as a property owner are not "assumed" by the lender because you chose to move mom out of the unit. If there are outstanding liens or claims, the lender will not even accept a Deed in Lieu of Foreclosure because they would have to take the property including those other liens. If other liens are present, they will opt for a foreclosure action which would force a sale at auction which would eliminate any other liens.
  
  I honestly do not know what rights the HOA has now or what obligations they can look to you or to mom's estate at probate to settle. I would suggest that you contact an attorney to determine what your legal rights and obligations are at this point. As I stated earlier though, you do not have to worry about the loan, there will not be a deficiency amount on that no matter how far underwater the loan became.
  Reply to Michael
Kristeen Barclay
November 26th, 2018

In the case of catastrophic disaster (like the Paradise / Camp Fire) what are the obligations/requirements of the home owner? My home was a complete loss and the town and area are unlikely livable for some time to come. kdb
Reply to Kristeen
- Michael Branson
  November 26th, 2018
  
  Hello Kristeen,
  Let me start by saying how sorry I am that you must go through this. HUD works with servicers and borrowers during times of natural disasters and they will work with you at this time as well. Just like times of flooding, earthquakes, hurricanes, etc., everyone realizes that there will be some time to sort things out and then resources will be stretched during the rebuilding process.
  Contact your loan servicer and they will let you know how best to proceed but rest assured, they are no stranger to the results of natural disasters and will know how to work through this with you that will best make sense in your circumstances.
  Reply to Michael
- Michael Branson
  November 26th, 2018
  
  Good Morning,
  That's odd. They should be sending you a monthly statement. I do not know how long it's been since you received the last statement, but if you take that statement and look at the amount of money you owed and then look at the interest and any fees accruing, you can determine about what you owe from that (don't forget to add any new funds you withdrew, if any).
  For example, if your amount owed was $100,000 and you were accruing $600.00 per month interest at that time and it's been three months, you will have accrued a little more interest as the balance grows but it won't be tremendous. You can round for the purposes of estimating the amount but add the $600 three times. If you take the amount that the last statement rose (i.e. the interest amount was $10.00 higher than the previous statement), you can keep increasing the amount by this much in your estimate. This is by no means an exact method to determine your balance, but it will get you close enough to know about where you stand and what you need to do for a refinance of the loan.
  Unless you are so close to being able to get a new loan that $100 either way would make or break the new loan, you can proceed with your refinance and the settlement agent would send in a request for a Beneficiary's Demand to pay off the existing loan. The lender has only a certain amount of time by law to produce the demand or face penalties. But we can already be well on your way to completing your new loan before the demand is even requested by the settlement agent. I wish you luck.
  Reply to Michael
tom mccall
August 6th, 2017

will I still have a tax write off for my home if I have a reverse mortgage?
Reply to tom
Jane Horton-Leasman
April 18th, 2011

Are the circumstances the same as "death"/estate, as with a person with a Reverse Mortgage and they have to sell and relocate. Is it still a non-recourse when the property has depreciated and is sold for considerably under the amount the Reverse Mortgage has accrued to?

Does the Reverse Mortgage owner have recourse under these circumstances, vs death/estate selling the property?

Thank you,

Jane Horton-Leasman
Reply to Jane

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