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Listing or settling a home after the last HECM borrower dies

Tom Jarboe, NMLS #210600
Checked November 3, 2026

Written for real estate agents, planners, CPAs and attorneys. Homeowner or family member? Start with the family guide: Heirs: keep the house, sell it, or walk away.

Here's how I explain it: the clock starts before probate is done, and someone needs authority to sign before anything closes. The family's side is in keep, sell or walk away; a living borrower's sale is in selling a home with a reverse mortgage.

The clocks, in order

The 30 days are for stating the plan, not closing. The servicer's own extra 90-day extension isn't selling time, and no extension is promised. Don't wait for the letter: HUD lets the servicer accept a phone call as notice of the death.

The 95% rule, and what it means for pricing

When the loan is due, the estate may sell for at least the lesser of the balance or 95% of the current appraised value, and the net proceeds satisfy the loan.

The servicer orders the appraisal within 30 days of the request and pays for it up front, then is repaid from the sale.

In a sale for less than the balance, HUD's rule limits the sale's closing costs to the greater of 11% of the price or an amount HUD sets (24 CFR 206.125).

For the listing agent:

• When the balance is higher than value, price from the servicer's appraisal, not your comps, and get its written OK on any offer first.
• Watch for other liens. To release the HECM for the sale, HUD's rule requires no junior liens (other than HUD's own second mortgage) and all net proceeds paid to the servicer (206.125(c)). A second loan, a judgment or a state property tax postponement lien must be cleared first.

Keeping the home: HUD's own materials describe the heir payoff differently, so get the exact payoff from the servicer in writing before an heir applies for a new loan. The balance keeps growing with interest and mortgage insurance until the loan is paid, so every month of delay costs the estate.

A HECM is non-recourse: the lender collects only from the home, so the estate and heirs never owe the difference (24 CFR 206.27(b)(8)). FHA insurance protects the lender, not the family. New American Funding is not acting for HUD, FHA or any government agency.

Who can sign, in California

HUD lets the borrower's estate or any "other party with legal right to dispose of the property" sell or give the deed in lieu. California law decides who that is. These are the rules and their sources, not legal advice. Attorneys should rely on their own judgment, and agents should confirm authority with the estate's attorney.

• Probate. No one can administer the estate until appointed and letters issue (Prob. Code 8400). Before letters, a named executor may only pay funeral expenses and take necessary steps to maintain and preserve the estate (8400(b)).
• Independent administration. Full authority includes selling real property (10511) after a notice of proposed action given at least 15 days ahead (10586), without court-confirmation rules such as the minimum sale price tied to the appraisal (10503). Limited authority excludes selling real property (10403).
• Living trust. The successor trustee may sell (16226) and can give a certification of trust instead of the whole trust (18100.5). A trust that becomes irrevocable at death triggers notice to beneficiaries and heirs (16061.7).
• Simpler paths. A recorded transfer on death deed passes the home subject to recorded liens, including the HECM (5652). A successor to a main home worth no more than $750,000 (set by law for deaths on or after April 1, 2025) may petition after 40 days without letters (13151). More in titles, trusts and probate.

Keeping the house insured and cared for while it sits

HUD's heirs sheet says taxes and insurance stay the estate's job until title transfers, and Probate Code 9650(b) requires a personal representative to pay taxes and protect and preserve estate property. In practice:

• Keep the homeowners policy in force, and ask the carrier in writing how it treats a vacant home.
• Keep taxes and HOA dues paid. Secure the home and take dated photos of its condition.
• Don't rent it out while the loan is unresolved without asking the servicer and the attorney.

If a spouse still lives there

A spouse who wasn't a borrower may stay only if named in the loan documents at closing as an eligible non-borrowing spouse, still married, and living there (24 CFR 206.55). Then there's no sale to plan yet, so check the loan papers before listing. See the non-borrowing spouse guide.

Deed in lieu and cash for keys

The servicer must accept a deed in lieu when it can get good and marketable title (24 CFR 206.125(f); Handbook III.B.2.d.vi).

It may offer "cash for keys," at its choice, within HUD's caps: up to $7,500 plus up to $5,000 in probate costs if completed within 365 days of the due date, or $5,000 plus probate costs from day 366 to day 547. More in deed in lieu after a death.

Checklist: who does what

• Heir or executor: call the servicer, report the death, and ask in writing for the payoff, appraisal and deadlines.
• Attorney: confirm who has authority, then send the servicer proof and tell it if probate is open.
• Executor or trustee: keep taxes, insurance and HOA dues paid, and tell the servicer the plan in writing within 30 days of the notice.
• Listing agent: order a title report early, price from the servicer's appraisal, and get written approval of any offer below the balance.
• Listing agent: keep a marketing log (listing date, showings, offers) for any extension request.
• Heir keeping the home: talk to a lender in the first weeks.
• Everyone: refer tax questions to a tax professional and Prop 19 to the county assessor.

When it goes wrong

• No authority yet. Start the petition and call the servicer the same week.
• Silence. The servicer can move toward foreclosure, and cash for keys may be lost.
• An heir's new loan stalls. No one can promise it closes in time. Have a listing plan ready.
• An unnamed spouse. On loans from Aug. 4, 2014 on, marriage alone gives no deferral, and the heirs' clock applies. On older loans, ask the servicer whether HUD's Mortgagee Optional Election applies.
• Private (proprietary) loans such as HomeSafe set their own rules. Ask the servicer.

Working with me

Call me at (909) 869-6588 or email [email protected]. Your client is welcome to call me directly, and I'll say plainly when a new loan isn't a fit. I'm not the servicer and can't change its decisions.

For anyone considering a reverse mortgage of their own, counseling with an independent HUD-approved counselor is required before applying, and California adds a 7-day wait after counseling before a final application or any fees.

This page is education only. I don't pay or accept referral fees or anything of value for referrals, and your clients are always free to choose any lender.

Tom Jarboe, Regional Sales Manager, New American Funding, NMLS #210600, Diamond Bar.

Have a client weighing a reverse mortgage? Call or email me: (909) 869-6588. More for professionals.

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