When the last surviving borrower of a reverse mortgage experiences a “maturity event”—such as passing away, selling the property, or permanently moving out—the loan becomes due, and heirs must decide how to proceed. Understanding their options and the importance of timely communication with the loan servicer is crucial.
Options Available to Heirs:
- Repay the Loan to Retain the Property: Heirs can pay off the reverse mortgage balance using personal funds or by securing new financing, allowing them to keep the home within the family.
- Sell the Property: Heirs may choose to sell the home, using the proceeds to repay the loan. Any remaining funds after settling the mortgage belong to the heirs.
- Deed the Property to the Lender (Deed-in-Lieu of Foreclosure): If managing a sale is not feasible or if the loan balance exceeds the home’s value, heirs can transfer ownership to the lender, satisfying the debt without further financial obligation.
- Allow Foreclosure: Heirs may opt to take no action, leading the lender to foreclose on the property to recover the amount owed.
Importance of Timely Communication with the Loan Servicer:
- Immediate Notification: Informing the servicer promptly about the maturity event initiates the process and clarifies available options.
- Adherence to Deadlines: Heirs typically have a limited timeframe to decide on and implement their chosen course of action.
- Exploring Solutions: Proactive communication allows heirs to discuss potential repayment plans or alternatives, potentially avoiding foreclosure.
Understanding these options and maintaining open communication with the loan servicer are essential steps for heirs managing a reverse mortgage after a maturity event.
Michael Pankow is a fully credentialed Certified Senior Advisor (CSA) by the Society of Certified Senior Advisors and is licensed to provide retail mortgage lending services in 50 states. NMLS number is 220611 and can be reached at 916.296.7765.
