What Happens to a Reverse Mortgage When You Inherit the House in Maryland?

When the last surviving borrower on a reverse mortgage dies, the loan becomes "due and payable" right away — but heirs generally get 30 days after the servicer's formal notice to tell them what they plan to do, and often up to six months total to actually sell, refinance, or pay it off.

Why this matters right now

On September 1, 2026, HUD reopened bidding on approximately 2,500 reverse mortgage notes with about $730 million in balances, per HUD's Federal Register notice HNVLS 2026-1 (January 21, 2026; the August 10, 2026 second notice confirms the September 1, 2026 bid date), where the borrower had died and, in HUD's words, "heirs have not come forward in the time elapsed." Those loans aren't being sold as houses; they're being sold as debt, to investors who then take over collection and foreclosure. It's a concrete, current example of what happens when a family misses the window: the government stops waiting and moves the loan off its books.

This isn't a rare product on the way out, either. Homeowners 62 and older are sitting on a record $14.92 trillion in home equity as of early 2026 (NRMLA/RiskSpan Reverse Mortgage Market Index), and while new reverse mortgage originations are down sharply from their 2009 peak, hundreds of thousands of existing loans are still active — which means hundreds of thousands of families will eventually face this exact situation.

What "due and payable" actually means for heirs

A reverse mortgage (most commonly a HECM — Home Equity Conversion Mortgage) doesn't transfer to heirs the way a regular mortgage does. The servicer is notified of the death — often automatically, through Social Security's death records — and sends the estate or heirs a formal notice that the balance is now owed in full. From that notice, heirs generally have three options:

• Keep the home. Pay off the loan balance, or — if the balance is higher than the home is worth — pay 95% of the current appraised value instead, with FHA mortgage insurance covering the rest. Because a HECM is a non-recourse loan, heirs are never personally on the hook for a shortfall.
• Sell the home. The payoff comes out of the sale proceeds; any remaining equity goes to the estate. If you're weighing how to handle the property, here's the best way to sell inherited property in Maryland.
• Walk away. If there's no equity worth pursuing, heirs can sign a deed in lieu of foreclosure and have no further obligation.

The 30-day figure is the deadline to respond to the servicer — to state an intention. Actually closing on a sale, securing refinancing, or completing probate authority to act on the estate's behalf can take considerably longer, and HUD can grant extensions in stages (up to six months, sometimes more) when heirs show active progress: a signed listing agreement, evidence the home is being marketed, a signed purchase contract, or a refinance application already in motion.

Where this collides with the probate process

This is the part most reverse-mortgage explainers skip, and it's the part that actually decides the outcome for Montgomery County families: you generally can't sell or refinance the home until someone has legal authority to act for the estate. That means opening probate and getting Letters of Administration (or confirming authority under a will) before a title company, buyer, or lender will treat you as the person who can sign. If you need a realistic sense of timing, review the Montgomery County probate timeline. If that process hasn't started the day the due-and-payable notice arrives, the clock on the reverse mortgage and the clock on probate are now running at the same time — and probate is usually the slower one.

The practical sequence that keeps a family ahead of the deadline: request a written payoff statement from the servicer immediately, order an appraisal so you know the real number you're working with, and open the estate in parallel rather than waiting to see how the mortgage situation resolves first. Heirs who can show the servicer real progress — not just intent — are the ones who get extensions instead of foreclosure notices. Once you have authority to act, the court-approval-to-closing process for selling a probate home runs alongside paying off the reverse mortgage from proceeds at closing. You can see how that works in the guide to selling a probate property in Maryland.

If you're in Maryland and a reverse mortgage is heading toward default or foreclosure, the state's Homeowner Assistance hotline (1-877-462-7555) can refer you to a HUD-approved housing counselor at no cost — worth calling alongside, not instead of, getting probate and real estate guidance moving.

Related questions

Do heirs have to pay off a reverse mortgage in Maryland?

Only if they want to keep the house. If they sell or walk away instead, the loan is settled from the sale proceeds or through a deed in lieu of foreclosure — heirs don't pay it out of pocket in either case.

How long do heirs have after a reverse mortgage borrower dies?

Thirty days to respond to the servicer's due-and-payable notice, and typically up to six months total to sell, refinance, or pay off the loan, with extensions possible if heirs can document active progress.

Can heirs owe more than the house is worth?

No. HECM loans are non-recourse — the debt is settled by the home's value (or 95% of its appraised value, with FHA insurance covering any gap), never by the heirs' own assets.

What happens if heirs do nothing?

The servicer moves toward foreclosure, and in HUD's case, the loan itself can be sold off to a private investor who takes over collection — as happened with the roughly 1,500 loans HUD placed for sale on September 1, 2026, all tied to deceased borrowers whose heirs never came forward.

Next step

Still deciding whether to keep, refinance, or sell? Talk it through before the clock forces your hand.

Marc Cormier is a licensed real estate professional with Berkshire Hathaway HomeServices PenFed Realty, based in Montgomery County, Maryland. He has 27 years of experience and close to 1,000 homes sold, with a focus on probate, distressed properties, bankruptcy trustee sales, and downsizing for families across Maryland, DC, and Northern Virginia. He is the author of an Amazon best-selling book on probate real estate and holds the SRES (Seniors Real Estate Specialist) designation.

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