Inherited a house with a reverse mortgage? The 30-day letter, the 95% rule, and selling

The timeline after the last borrower dies

When	What happens	The rule
The last borrower dies	The loan becomes due and payable, unless a surviving spouse qualifies to stay	24 CFR §206.27(c)(1)
The servicer’s notice arrives	The heirs have 30 days from the date of notice to pay the loan off, sell the house, or give it back by deed in lieu	§206.125(a)(2)
Within six months of the due date	The servicer must start foreclosure, unless HUD approves more time	§206.125(d)(1)

Answer the letter inside the 30 days, in writing, even if all you can say yet is that the family intends to sell. Then ask the servicer for an appraisal: HUD’s 2023 letter says the estate, an heir, or another party with authority to sell can request one (ML 2023-23).

Equity or underwater: two different sales

If the house is worth more than the loan, this is a regular inherited sale. The title company pays off the reverse mortgage at closing and the heirs keep the rest. Any of our three numbers can work.

If the loan is more than the house is worth, HUD sets the lowest price the servicer has to accept, and that price can’t be more than 95% of the appraised value (§206.125(a)(2)(ii)). Closing costs on that sale are capped too. Our cash number is often below that line, so the sheet will say plainly when listing is the only path that gets approved, and we can list it.

Before anyone can sign

Someone still has to have the legal right to sell: an executor, an administrator, or heirs who can prove they own it now. If that isn’t sorted yet, start with selling an inherited house, which covers the main ways Texas families prove ownership. Tell the servicer you’re working on it, because the six-month clock keeps running.

Questions heirs ask

Do we have to pay off the reverse mortgage ourselves?

No. You can sell the house and pay it off from the sale, or give the house back by deed in lieu. Paying it off yourselves is one of the options if you want to keep the house.

What if the house is worth less than the loan?

Then the sale price the servicer can require is capped at 95% of the appraised value (§206.125(a)(2)(ii)). Ask your servicer and a probate attorney what that means for the estate in your case.

How long do we have to sell?

The servicer’s notice gives you 30 days to pay the loan off, sell the house or give it back by deed in lieu (§206.125(a)(2)). The servicer must start foreclosure within six months of the due date unless HUD approves more time (§206.125(d)(1)). Start early, because probate and the appraisal both take time.

What if Mom’s husband is still living in the house?

If he wasn’t a borrower but qualifies as an eligible non-borrowing spouse, the due date can be deferred while he lives there (§206.27(c)). Ask the servicer to confirm his status in writing.