When a Reverse Mortgage Becomes Due and Payable

Last reviewed 2026-05-26

A reverse mortgage becomes due and payable on the occurrence of any one of four federal maturity events. The estate or the borrower then has 6 months to act, with up to two 90-day extensions on documented good-faith effort, for a maximum disposition window of 12 months. The HECM is non-recourse: no one ever owes more than the home is worth at sale.

Throughout the life of the loan the borrower keeps three federal obligations: property taxes paid current, homeowners insurance in force, and the home occupied as a primary residence. Failure on any one of these is itself a maturity event. This page covers the trigger, the timeline, and the cap on what can ever be owed.

The FHA-insured HECM is a loan, not a benefit. It removes the monthly principal-and-interest payment while the borrower lives in the home; it does not remove the loan itself. The four federal maturity events, the 6-month + 2 × 90-day timeline, and the federal non-recourse cap are set out in HUD Handbook 4000.1, Section II.B.9; 24 CFR §206.27; and HUD Mortgagee Letter 2015-10. Full citations appear in the Sources section.

First action: within 30 days, notify the servicer in writing. The 6-month clock starts at the maturity event, not at notification. A written notice opens the federal timeline and gets you a preliminary payoff figure.

What triggers a reverse mortgage becoming due and payable?

The HECM contract names four events that mature the loan (HUD Handbook 4000.1, Section II.B.9; 24 CFR §206.27). Any one of them, alone, is enough.

1. The last surviving borrower dies. If two borrowers signed the loan together, the loan remains in place for the survivor on the first death; it matures on the second death. A non-borrowing occupant (an adult child, an unmarried partner, a roommate) has no contractual right to remain. A married, eligible non-borrowing spouse on a post-August 4, 2014 loan may qualify for deferral under HUD ML 2015-15.
2. The last surviving borrower moves out of the home for more than 12 consecutive months. Moving into assisted living, a memory-care facility, a nursing home, or any other primary residence (a child's home, a different city) starts the 12-month clock. A short hospital stay does not trigger it; a permanent move does. The 12-month window runs from the move, not from any notification. The assisted living and nursing home guide covers this trigger in detail, including the co-borrower and non-borrowing-spouse protections.
3. The home is sold. Title transfers to a buyer; the loan is paid off from the proceeds at closing. The federal non-recourse cap (covered below) controls if the balance has grown past the sale price.
4. The borrower defaults on a property-charge obligation. Failure to pay property taxes, failure to maintain homeowners insurance, failure to occupy the home as a primary residence, or significant deferred maintenance that constitutes a default under the note. This is the most common cause of HECM foreclosure in HUD's data.

The trigger is binary: one event opens the disposition window. The window itself runs the same way regardless of which event opened it.

How long is the 6-month + 2 × 90-day timeline?

The 6-month clock starts at the maturity event itself: the date of death, the move-out date, the date of sale, or the date of the property-charge default. It does not start at the date the servicer is notified. Late notification compresses the disposition window without extending it. Federal rules give the estate, the surviving borrower, or the surviving heir a structured window to dispose of the loan (24 CFR §206.125; HUD Mortgagee Letter 2015-10):

• 30 days from the maturity event: notify the servicer in writing. For a death, notification is typically the responsibility of the personal representative of the estate. The servicer issues a written demand for payoff that opens the federal timeline and produces a preliminary payoff figure.
• 6 months from the maturity event: the loan must be paid off in full, the home sold, the loan refinanced into a forward mortgage in an heir's name, or a deed-in-lieu signed.
• First 90-day extension, on documented good-faith effort: a listed home with a real buyer in process, a refinance application in underwriting, a probate court delay, or an executed purchase contract. Granted by the servicer at its discretion within HUD guidelines.
• Second 90-day extension, on continued good-faith effort: same standard, evaluated again.
• 12 months total is the maximum federal disposition window. Beyond that, the servicer initiates foreclosure.

The extensions are not automatic. They are granted on evidence: a listing agreement, an executed purchase contract, a refinance commitment letter, or a probate filing. A vague intention does not qualify. The heir or estate must request the extension before the deadline; retroactive extensions are not available.

What is the federal non-recourse cap on what is owed?

The HECM is non-recourse by federal statute (12 USC §1715z-20) and regulation (24 CFR §206.125). Neither the borrower nor the heirs nor the estate ever owes more than the home is worth at the time of sale. Other estate assets are not at risk. The 2% upfront FHA mortgage insurance premium and 0.5% ongoing premium that every HECM borrower pays funds this protection through the FHA Mutual Mortgage Insurance Fund.

The non-recourse cap works in two directions, depending on who is buying the home back:

• If the home sells to a third party, sale proceeds pay the balance up to the sale price; FHA insurance covers any shortfall above. The borrower's heirs receive any equity above the payoff (less selling costs); they receive nothing toward a shortfall, but they also owe nothing toward it.
• If the heirs want to keep the home and the balance has grown past the appraised value, federal rules let them buy the home at the lesser of the loan balance or 95% of the current appraised value (24 CFR §206.125). FHA insurance covers the gap between 95% of appraised value and the loan balance.

A worked example: parent dies with a $340,000 HECM balance on a home appraised at $300,000. Heirs who want to keep the home pay $285,000 (95% of $300,000), not the $340,000 balance. FHA insurance absorbs the $55,000 difference. Heirs who want to sell list the home, the title company settles the HECM payoff at closing, and any shortfall above the sale price is covered by FHA insurance. None of the deficiency is pursued from the estate.

The 95% rule is the single most important federal protection for heirs of a borrower whose home has lost value or whose loan has compounded faster than the home appreciated. It exists for exactly that scenario.

What are the four heir options?

Within the timeline, federal rules permit four dispositions (HUD Handbook 4000.1, Section II.B.9; 24 CFR §206.125):

1. Pay off the balance and keep the home. From any source: savings, a forward refinance in the heir's name, family contributions, or a combination. The payoff figure for a keep-the-home heir is the lesser of the loan balance or 95% of the appraised value.
2. Sell the home. A standard real-estate sale; the title company settles the HECM at closing. Equity above the payoff goes to the estate per the will; shortfall below is covered by FHA insurance.
3. Refinance into a forward mortgage in an heir's name on the same home. The heir takes title and qualifies for a conventional or government-backed loan, using the proceeds to retire the HECM balance. Common when one heir wants to keep the family home and the others want their share in cash.
4. Deed-in-lieu of foreclosure. The heirs sign the home over to the lender, end the obligation, and walk away. No deficiency judgment, no impact on other estate assets, no credit consequences for the heirs themselves. See the deed-in-lieu guide for the mechanics.

For the heir-side decision frame in more detail (paperwork, the 30-day mistakes heirs most often make, and the timing on each option), see the heirs guide.

What happens if no one acts?

If the estate misses the 6-month deadline without extensions, or if no heir steps forward to take action, the servicer initiates foreclosure. The home is sold at foreclosure sale; sale proceeds pay the balance up to the sale price; FHA insurance covers any shortfall. Other estate assets are not pursued; no deficiency judgment is entered.

The practical cost of doing nothing is the loss of any equity above the balance that a normal sale would have preserved. If the home is worth more than the loan, equity that would have flowed to the heirs through a regular sale instead gets eaten by foreclosure costs and the lender's process. The non-recourse cap protects against owing more than the home is worth; it does not protect against losing equity in a forced sale.

For the parallel guide on what happens at the borrower's death specifically (including the eligible non-borrowing spouse rules), see what happens to a reverse mortgage when the borrower dies. For the mechanics of how the balance compounds during the borrower's life, see how a reverse mortgage is paid back.

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