Paying Off a Reverse Mortgage

In my business of arranging loans to trusts and estates, I pay off a significant number of reverse mortgages. As more seniors turn to reverse mortgages, surviving spouses or adult children become overwhelmed when one or both of their parents eventually dies.

When a reverse mortgage borrower dies, the loan becomes due and payable; and, if adequate and quick communication to the reverse mortgage company is not made, the property will go into foreclosure and additional fees added. Beneficiaries of trusts and estates, and intestate heirs, frequently call me when they want to keep the family home and prevent a trustee sale or foreclosure proceeding.

Here are a few practical tips:

  • Please call me as soon as the reverse mortgage borrower passes. The longer it takes to payoff the reverse mortgage lender, the more additional fees will be added.
  • A reverse mortgage servicer uses a number of resources to find out when a borrower dies, including the Social Security death index, proprietary databases and annual occupancy letters. Once the servicer discovers the borrower has died (or vacated the property for a nursing home), the servicer sends out a letter intended to inform the heirs of the rules of the loan and ascertain their intentions for the loan and the property.
  • Alternatively, if the reverse mortgage borrower was married, the surviving spouse might be able to remain in the home even if he or she wasn’t a co-borrower (please look at HUD’s New Guidelines for Non-Borrowing Spouses).
  • According to HUD guidelines: If the property is underwater the heirs may purchase the property directly from the lender at 95% of the appraised value. The borrower’s personal belongings and furnishings can be removed. Fixtures, as defined by state law, can’t.
  • If there are tenants in the property after the borrower passes away, it’s fraud (according to HUD guidelines) because the loan became payable when the last owner vacated the premises.

First Probate Loans manages the probate financing process for short-term loans to trusts and estates, post-property distribution loans, and distributions of trusts and estates. The company specializes in resolving challenging and difficult problems related to title reports. The company provides complimentary property profiles, recorded liens and last vesting deeds, upon request.

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About The Author

Jonathan Brooks
Jonathan Brooks, President of First Probate Loans Jonathan maintains highly specialized expertise in California real property, finance/lending, and trust and estate laws. He has completed nearly 10,000 financial transactions to estates and trusts in more than 25 years of probate loan management work. Jonathan is a trusted source for attorneys throughout California, as well as for mediation and arbitration judges. A recognized industry expert, he serves as a single source for estate mortgage borrowing needs. California Bureau of Real Estate Broker # 01881423 Nationwide Mortgage Licensing System and Registry NMLS # 307111 Paralegal


  • Danie Matthews on September 26, 2017

    These are great tips!

  • Danie on September 26, 2017

    These are great tips!

  • Charly Neel on September 26, 2017

    I’m curious since this article addresses payment strictly in the event of the homeowner passing away- are reverse mortgages only offered to older homeowners?

  • Christine on September 27, 2017

    In your article you state “when a reverse mortgage borrower dies, the loan becomes due and payable”. I am wondering what do you mean by “due and payable” when a reverse mortgage borrower dies?

  • Shi on September 27, 2017

    Why do we have to report right away when the reverse mortgage borrower dies besides having additional cost?

  • Riley Ellis on September 27, 2017

    Great article! What do you mean by ‘underwater’?

  • Daniella Gordon on September 28, 2017

    Great info to know!

  • Mabel Smith on October 14, 2017

    This is a helpful article! Mortgages can be confusing, thank you for the tips.

  • Danny Monroe on October 22, 2020

    If we go to probate and it’s taking up to 18 months for probate can hud sale the house

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