When a reverse mortgage borrower passes away, the home stays in the homeowner’s name. Nothing automatically transfers to the lender. The heirs decide what happens next: keep the home or sell it.

If the family wants to keep the property, they must pay off the reverse mortgage. HUD gives them two payoff options:
• Pay the loan balance, or
• Pay 95% of the home’s current market value if the loan balance is higher.
Whichever is less is all they’re required to pay under the FHA’s non-recourse protection.

If the family chooses to sell the home, the proceeds from the sale pay off the mortgage. Any remaining equity goes to the estate. If the market has dropped and there’s no equity left, heirs can still sell the home or notify the lender that they’re choosing not to retain the property.

The lender only takes ownership if the heirs voluntarily sign a deed or if the lender completes a foreclosure, just like a traditional mortgage. There is no automatic “takeover” upon death.

Most families simply need to notify the lender of their decision, provide a copy of the death certificate, and proceed with the option that best suits their circumstances.

For a deeper walkthrough, see Reverse Mortgage After Death: What Heirs & Family Must Know.