A parent with a reverse mortgage has passed: what heirs in Florida can do, and how much time they have

Reverse mortgages are common in Florida, and so is the situation that follows: a parent passes, and a few weeks later a letter arrives saying the whole loan is due. It reads like a demand for money the family does not have. It is not quite that. Heirs have real options and more protection than the letter suggests.

This guide covers the most common type, the federally insured Home Equity Conversion Mortgage, or HECM. It is general information, not legal advice. Private reverse mortgages can have different terms, so read the loan documents or ask an attorney.

What a reverse mortgage is, briefly

The owner borrowed against the house and made no monthly payments. Interest and fees were added to the balance every month, so the debt grew over time. The loan comes due when the last borrower dies, sells, or moves out permanently.

Two things matter most to heirs:

• The loan is non-recourse. The lender can be repaid from the house and nothing else. Heirs are not personally responsible, and the estate does not owe the difference if the house is worth less than the balance.
• The house secures it. If the loan is not paid off, the lender can foreclose.

The letter, and the first deadline

After the borrower's death, the servicer sends a due and payable notice. Heirs generally have about 30 days from that notice to tell the servicer what they intend to do.

Answer that letter in writing. Send a copy of the death certificate, say who is handling the estate, and say which option you are pursuing. A servicer that hears nothing moves toward foreclosure. One that hears from a family with a plan usually gives time.

The three choices

1. Keep the house. Heirs can pay off the loan and keep the property. On an insured reverse mortgage, they can usually do that for the lesser of the full balance or 95 percent of the home's current appraised value. If the balance has grown past what the house is worth, that rule can save the family a lot. Most heirs who keep the house get a new regular mortgage to do it.

2. Sell the house. If the house is worth more than the balance, selling pays off the loan and the rest belongs to the heirs. If it is worth less, heirs can still generally sell it for at least 95 percent of appraised value, and the mortgage insurance covers the shortfall. Either way, nothing comes out of the heirs' own pockets.

3. Give it back. If the family does not want the house and there is no equity, they can sign it over with a deed in lieu of foreclosure, or simply let the lender foreclose. Because the loan is non-recourse, neither one leaves the heirs owing money.

How much time heirs really have

The servicer generally allows about six months from the borrower's death to pay off the loan or sell. Heirs who are actively working on it, with a listing, a contract or a loan application to show, can ask for extensions, typically up to two of about 90 days each, which need approval.

That adds up to as much as a year in the best case. The time is not automatic. It depends on staying in touch and sending the servicer proof of progress every time they ask.

The Florida complication: probate

Before anyone can sell, someone needs the legal authority to sign a deed. If the house was in the parent's name alone, that usually means probate, and probate in Florida commonly takes six months to a year. The reverse mortgage clock and the probate clock run at the same time, and the mortgage clock is usually shorter.

So start probate early. An attorney can often get a personal representative appointed, or a homestead order entered, within the first few months if the family moves quickly. How probate and homestead work when selling an inherited house in Jacksonville.

If a foreclosure case is filed

If the deadlines pass, the lender files a foreclosure lawsuit and records a lis pendens. The case names the estate and the heirs as defendants. That is why some families find out about the situation from a process server.

A foreclosure filing does not end the options. The house can still be sold and the loan paid off at closing, and the 95 percent rule generally still applies. But the case adds attorney fees to the balance, and it moves toward a court-ordered sale. The Florida foreclosure timeline, stage by stage.

Respond to the lawsuit. A default judgment shortens the time left considerably.

Working out whether there is equity

1. Ask the servicer for a payoff statement. Heirs are entitled to one once they show a death certificate and their relationship.
2. Find out what the house is worth as it sits. Look at recent sales nearby, and be honest about the roof, the systems and the condition. Many houses with reverse mortgages have gone years without major repairs.
3. Subtract. If the value is clearly above the payoff, that difference belongs to the heirs and is worth protecting. If it is close or below, the house may not be worth the effort, and giving it back costs nothing.

How we help families in this spot

We buy houses for cash across Duval County and Clay County, including houses with reverse mortgages that have come due and houses already in foreclosure. We get the payoff, tell you plainly whether there is equity, and if there is, show you in writing what the family would receive. We can agree on a price while probate is still under way and close through a local title company when there is authority to sign.

If there is no equity, we will tell you that too, because then the right move is usually to hand the house back. To find out where you stand, send us the address. There is no charge and no obligation.