Reverse Mortgage on an Inherited Texas Home: Your Options

If a parent passed away with a reverse mortgage on their Texas home, you’re probably reading this with a deadline letter in front of you and a lot of questions. Reverse mortgages move fast after death, but you have more options — and more protection — than the servicer’s first letter suggests.

What a Reverse Mortgage Actually Is

A reverse mortgage lets homeowners 62 and older borrow against home equity without making monthly payments. Interest accrues, and the loan balance grows over time.

The most common type is a Home Equity Conversion Mortgage (HECM), insured by the federal government through HUD. Most Texas reverse mortgages are HECMs, and the rules below apply specifically to HECMs. Proprietary jumbo reverse mortgages from private lenders may follow different timelines.

While the borrower lived in the home, no payment was due. When the last borrower dies, moves out permanently, or fails to keep up taxes and insurance, the loan becomes “due and payable.” Death of the last borrower triggers that clock.

The Clock Starts the Day the Borrower Dies

Once the servicer learns of the borrower’s death, they send a “due and payable” notice. From that point, heirs typically have:

• 30 days to respond and let the servicer know what you plan to do
• 6 months to repay the loan, sell the home, or sign a deed in lieu
• Up to two 90-day extensions if you can show you’re actively working toward sale or payoff

In the best case, that adds up to about 12 months. In the worst case, if you ignore the letters, the servicer can move toward foreclosure as early as month 7.

The single most important thing you can do this week: open the mail, call the servicer, and let them know you’re working on it. Even a phone call documenting that you’re handling the estate buys time.

Your Four Real Options

You have four real choices when you inherit a Texas home with a reverse mortgage. Pick based on the loan balance versus the home’s current value.

Option 1: Sell the Home

This is the most common path. If the home is worth more than the loan balance — which is true for many older Texas reverse mortgages thanks to recent appreciation — you sell the home, pay off the loan, and the heirs keep the equity.

You can list while the loan is still in “due and payable” status. The closing pays off the servicer in full, just like any other mortgage payoff at closing. For a broader picture of how a Texas probate sale works, read selling inherited property in Texas and the Texas probate property sale process.

Option 2: Pay Off the Loan and Keep the Home

If you want to keep the home — maybe it’s your childhood home, or it’s in a great location — you can refinance into a conventional mortgage in your name or pay off the loan in cash. The payoff amount is whatever the servicer quotes you in writing.

This is where the federal non-recourse rule becomes a gift. Even if the loan balance is more than the home is worth, heirs who want to keep the home can pay 95% of the current appraised value — not the higher loan balance. The FHA insurance covers the rest.

Option 3: Deed in Lieu of Foreclosure

If the loan is more than the home is worth and you don’t want the property, you can sign a deed in lieu — handing the property to the lender in exchange for clearing the debt. This is cleaner than foreclosure and avoids damage to your credit or estate.

Option 4: Walk Away

If the loan exceeds the home’s value and there are no other estate assets at risk, you can simply do nothing and let the servicer foreclose. The reverse mortgage is non-recourse, which means the lender cannot come after the estate’s other assets or the heirs personally.

The Non-Recourse Protection You Need to Know

This is the most misunderstood part of inheriting a reverse mortgage. HECMs are non-recourse loans under federal law (24 CFR § 206.125). That means:

• The estate and heirs are not personally liable for the loan balance.
• The most the lender can collect is the home’s current appraised value.
• If you want to keep the home but the loan exceeds the value, you only owe 95% of the appraised value.
• If you choose to walk away, the lender’s only recovery is the home itself.

The 95% rule is a federal protection — but you only get it if you’re actively engaging with the servicer. Heirs who ignore the letters can lose the option.

How to Request an Appraisal From the Servicer

If you suspect the loan balance is close to or above the home’s value, request an appraisal in writing. Send a short letter or email to the servicer asking for:

1. A current payoff statement
2. An FHA-approved appraisal of the property
3. Confirmation in writing of any extensions you’ve been granted

The servicer typically orders the appraisal at their cost. The appraised value sets the ceiling on what you’d owe if you decide to keep the home under the 95% rule.

If you’re staring at a stack of mail from the servicer and trying to figure out whether to sell, pay off, or walk away, that’s exactly what our free consultation is for. We can run the numbers with you, connect you with a Texas appraiser, and help you map out a timeline that protects the estate. Reach out here and we’ll respond within one business day.

What If Heirs Do Nothing?

If you ignore the servicer’s letters and let the 6-month window close without action, the lender will start foreclosure. In Texas, non-judicial foreclosure on a HECM can move within a few months.

Foreclosure does not create personal liability for heirs on a HECM — the non-recourse protection still applies. But you lose any equity in the home, any chance to keep it, and any control over the timing.

If the home has substantial equity, foreclosure is almost always the worst outcome. A simple sale or payoff captures that equity for the family.

Reverse Mortgages and Texas Probate

A reverse mortgage doesn’t go through probate the way a regular debt would, but the executor still has to deal with it. If the estate is going through probate, the executor should:

• Notify the servicer of the death and provide a death certificate
• Coordinate with the probate attorney on which option makes sense
• Get authority to sell the home (Letters Testamentary or a muniment of title order) if a sale is the plan

For more on executor responsibilities, see executor duties in Texas. If the estate qualifies, muniment of title can speed things up.

If the property is in the Dallas area, our Dallas County probate guide covers local court timelines and market specifics.

Quick Recap

• A HECM becomes due and payable when the last borrower dies.
• You typically get 6 months, plus up to two 90-day extensions, to sell or pay off.
• Heirs can keep the home by paying 95% of appraised value, even if the loan is higher.
• The loan is non-recourse — the lender cannot pursue other estate assets.
• Doing nothing means foreclosure, but no personal liability under federal law.
• Engagement is everything. Call the servicer, document the conversation, and keep options open.

The 30-day notice from the servicer feels alarming, but Texas heirs have real options and real protections. Acting quickly preserves them.