A lot of older homeowners in South Bend, Mishawaka and Granger took out a reverse mortgage to stay in the house they raised their family in. It worked the way it was supposed to: no monthly payments, money for the furnace or the medical bills, and they got to stay home. Then they pass away, and a letter from a loan servicer most of the family has never heard of arrives at the house, saying the loan is now due and payable.
If that’s where you are, this guide explains what the letter means, how much time you really have, why you may owe far less than the balance on the statement, and how to get the house sold or kept without it ending in foreclosure. It covers the most common type of reverse mortgage, the FHA-insured Home Equity Conversion Mortgage (HECM). If your parent had a private “proprietary” reverse mortgage, the rules are set by that loan’s own documents, so read them or ask the servicer. This is general information, not legal advice.
When the last borrower dies, a HECM becomes due. The servicer gives the family 30 days to say what they plan to do, and the federal rules give about six months to sell or pay off before foreclosure has to start. Up to two 90-day extensions are possible if you can show you’re actively selling or arranging the money. If the house is worth less than the loan, it can be sold for 95% of its appraised value and FHA insurance covers the rest. The heirs don’t personally owe the shortfall. If the house is worth more, the difference belongs to the estate.
What Happens to the Loan When Mom or Dad Dies
A HECM doesn’t require monthly payments while the borrower lives in the house. According to HUD, the balance becomes due and payable when the borrower sells the home, stops living there as a primary residence, or when the last surviving borrower dies. At that point the loan stops paying out, and the balance (everything advanced, plus interest and mortgage insurance premiums) has to be settled.
Nobody in the family has to take on the loan. A HECM is non-recourse: the debt is repaid from the house, not from the heirs’ own money or the rest of the estate. What the family does decide is how the loan gets settled, and how fast. That decision is worth thousands of dollars either way.
If the reason the loan came due was a move into memory care or a nursing home rather than a death, the same “no longer the primary residence” rule applies. Our guide to selling a parent’s house after a move to nursing care covers the power-of-attorney and Indiana Medicaid side of that situation.
The Clock: 30 Days, Six Months, Two Extensions
This is the part families most often get wrong. They assume the house can sit until probate is done, and it can’t. Under HUD’s rules:
- 30 days to respond. Once the servicer sends the due-and-payable notice, it must give the family 30 days to pay the loan off, sell the house, or hand it back with a deed in lieu of foreclosure (24 CFR § 206.125). In practice that first month is when you tell the servicer, in writing, which of those you’re doing.
- About six months before foreclosure starts. HUD’s housing counseling handbook says the lender is limited to six months for the heirs or estate to pay off or sell. After that the servicer is expected to begin foreclosure.
- Up to two 90-day extensions. The servicer can ask HUD for up to two 90-day extensions, but only with proof that you’re working on it: a listing agreement, a signed purchase agreement, or a loan application if you’re keeping the house. Twelve months is the outside limit, not the plan.
The reverse mortgage industry’s trade association has pointed out that HUD doesn’t grant extra time just because an estate is still in probate. You need to be selling, refinancing or deeding the house back. That’s why the first step in St. Joseph County is to get someone legal authority to sign (see below) while you line up a sale, not one after the other.
Indiana forecloses through the courts, so even after the servicer files there is a court case before any sheriff’s sale. Our Indiana foreclosure timeline shows those stages. But a foreclosure on a parent’s house adds legal fees and interest to the balance, and those come out of whatever equity the family would have kept.
If the House Is Worth Less Than the Loan
Reverse mortgage balances grow every month, and after 10 or 15 years many of them are larger than the house is worth, especially on an older South Bend house that needs a roof, a furnace or a kitchen. Families see a statement for more than the house could sell for and assume they’ll have to make up the difference. They don’t.
Under 24 CFR § 206.125, the house can be sold for an amount set by HUD that is no more than 95% of its appraised value, with the net proceeds going to the loan. The Consumer Financial Protection Bureau describes the same rule: heirs can pay off the loan by selling for at least 95% of appraised value, and the rest is covered by the FHA mortgage insurance the borrower paid for. The same 95% figure applies if a family member wants to keep the house and buy it out.
Here is a hypothetical example. Say the statement shows a balance of $165,000 and the servicer’s appraisal comes in at $120,000. The loan can be settled by a sale at 95% of that appraisal, $114,000, and the remaining balance is the insurer’s problem, not yours. The family walks away owing nothing, though they also take nothing from the sale.
Two practical points about that appraisal:
- Condition drives the number. An appraiser who walks through a house with a wet basement, original wiring or a failing roof will value it as it stands. If you think the value came in wrong, ask the servicer how to have it reviewed before you sign anything.
- The servicer has to approve a sale below the balance. Send it the purchase agreement and wait for written approval of the payoff before you close. A title company will ask for the same thing.
If the house is worth more than the balance, the math is simple: sell, pay off the full balance at closing, and the difference goes to the estate and the heirs. It’s worth checking. A house bought decades ago can still have real equity even after years of a reverse mortgage. Our cash buyer vs. realtor comparison walks through what each route nets you.
Who Can Sign in Indiana
The servicer will deal with whoever has legal authority over the house. In Indiana that depends on how the title passed:
- A transfer on death deed. If your parent recorded a TOD deed naming you, the house passes outside probate under Indiana’s Transfer on Death Property Act (IC 32-17-14). The beneficiary records proof of the death and can sell, subject to the reverse mortgage, which still gets paid at closing.
- A small estate. Indiana’s small estate limit is $100,000 for a death after June 30, 2022 (IC 29-1-8-1). For real estate, IC 29-1-8-3 lets heirs record an affidavit with the county recorder when the gross probate estate, less liens and encumbrances, falls under that limit plus administration and funeral costs. Because the reverse mortgage counts as a lien, a house that is mostly borrowed against may fit under the limit even if its sale price wouldn’t. Ask an estate attorney whether your situation qualifies.
- Probate. If neither applies, someone has to be appointed personal representative by the St. Joseph Probate Court, a separate court from the main county courthouse, at 1000 S. Michigan St. in South Bend. Once the court issues letters, the personal representative can sign a purchase agreement while the estate is still open. You don’t have to wait for it to close.
Our step-by-step guide to selling an inherited house in South Bend covers probate, multiple heirs and taxes in more detail, and our inherited house page answers the most common questions families ask us.
Got a Due-and-Payable Letter?
We’ll give you a written as-is cash offer you can send straight to the servicer for approval, whether the house is worth more or less than the loan. We wait for the servicer’s sign-off, work with your estate attorney, and close when the paperwork is ready. Nothing obligates you.
A Surviving Spouse Who Wasn’t on the Loan
Some couples took out a reverse mortgage with only the older spouse as borrower. If that borrower dies, the surviving spouse may not have to leave. HUD has special rules for an eligible non-borrowing spouse that can put off repayment and let them stay in the house for life. HUD’s own guidance says the spouse must give the lender a Non-Borrowing Spouse Certification within 30 days of the borrower’s death, among other requirements. If this is your family’s situation, call the servicer and a HUD-approved housing counselor right away. Missing that window can cost the spouse the right to stay.
Your Four Options, Side by Side
| Option | Best When | What It Takes | The Catch |
|---|---|---|---|
| Sell on the open market | There’s equity and the house shows well | Repairs, cleanout, listing, a buyer’s loan approval | Every month adds interest to the balance, and a financed buyer can fall through after the clock has run. |
| Sell as-is for cash | The house needs work, the family is out of state, or the deadline is close | A written offer, servicer approval if it’s below the balance, a title company | Usually a lower price than a fully fixed-up listing, in exchange for speed and certainty. |
| Keep the house | A family member wants to live there | Pay off the balance, or 95% of appraised value if that’s lower, usually with a new loan | Getting a mortgage approved within the extension window. |
| Deed in lieu | No equity and nobody wants to deal with it | Signing the house over to the lender | The estate gets nothing. HUD may pay a “cash for keys” incentive if the deed is given within six months. |
Whatever you choose, keep the house insured, the utilities on and the property taxes paid while it’s sitting. An empty house in a Michiana winter can freeze, and an inherited house that sits empty can run into the city’s vacant-property rules. Our guide to selling a vacant house in South Bend covers registration and insurance. One Granger family settling an estate sold the house to us as-is, which let them skip the cleanout and the repairs.
We buy houses in South Bend, Mishawaka, Granger and the rest of St. Joseph County, and we’re used to waiting on a servicer’s approval letter. Our how it works page walks through each stage.
Who to Call First
- The loan servicer: the company named on the reverse mortgage statements. Report the death, ask for the payoff and the appraisal, and tell them in writing what you plan to do.
- A HUD-approved housing counselor: free or low-cost help with the servicer. The CFPB’s “Find a housing counselor” tool lists agencies by ZIP code.
- FHA Resource Center — (800) 225-5342: HUD’s line for questions about an FHA-insured HECM
- An Indiana estate attorney: to confirm who has authority to sign, whether that’s a TOD deed, a small estate affidavit or probate
- St. Joseph Probate Court: 1000 S. Michigan St., South Bend, if a personal representative needs to be appointed
General questions about selling are on our South Bend FAQ page.
Frequently Asked Questions
Do I have to pay off my parent’s reverse mortgage out of my own money?
No. An FHA-insured reverse mortgage (HECM) is non-recourse. It is repaid from the house, not from the heirs. If the house is worth less than the balance, it can be sold for 95% of its appraised value and FHA mortgage insurance covers the shortfall. You only pay the loan off yourself if you choose to keep the house.
How long do heirs have to sell a house with a reverse mortgage?
The servicer must give you 30 days from its due-and-payable notice to respond. HUD’s rules then allow about six months to sell or pay off before foreclosure starts, plus up to two 90-day extensions if you can show you’re actively selling or arranging financing. HUD doesn’t grant extra time just because the estate is in probate.
Can I keep my parent’s house if it has a reverse mortgage?
Yes, by paying off the loan. You pay the full balance, or 95% of the appraised value if that’s lower. Most families do that with a new mortgage of their own, and the extension request has to show that the loan application is under way.
What if the reverse mortgage is more than the house is worth?
Then the house can be sold for 95% of its appraised value to settle the loan, with the servicer’s approval, and nobody in the family owes the difference. You can also sign the house back to the lender with a deed in lieu of foreclosure. Either way, avoid letting it go to foreclosure, which adds fees and time without helping the family.
Selling an Inherited House With a Reverse Mortgage Without the Stress
Whether the house still has equity or the balance has passed what it’s worth, we can put a cash price in writing for the house as it stands. That gives the servicer a real offer to approve and gives your extension request the proof HUD looks for. We coordinate with the servicer, your estate attorney and the title company, and you can say no. Call (574) 498-3434 or send us the details online.