What rights do the family of a reverse mortgage borrower have when the borrower dies?
After a reverse mortgage borrower dies, their "heirs" may have rights. Heirs are people with legal rights to property of another after that person's death. A surviving spouse who was not married to the reverse mortgage borrower at the time of the loan may be an heir.
Once the borrower dies, the lender will expect to be paid or to take back the property. If you are an heir who wants to keep the property, you must follow deadlines and provide proof that you have rights to the property. This proof is often a death certificate, a will, or a trust. If a borrower did not leave a will or trust, Florida law will determine the heirs.
Upon the death of the borrower, the lender will send an appraiser to determine the home's market value. As an heir, you do not have to pay off the reverse mortgage balance in full to keep the property. You can keep the home for 95% of the property's market value, if that amount is lower than the loan balance. If you do not have the money to pay the balance or 95% of the market value, you still have options. You may be able to pay through a bankruptcy plan or by getting a mortgage in your own name to pay off the amount owed.
If you do not want to keep the property, you can sell the property for at least market value. You would have to pay the reverse mortgage company. If the sale proceeds are more than the value of the home, you can keep the difference. If you do not want to keep or sell the property, the lender will foreclose on the property and sell it. The lender cannot come after the heirs for more money if the sale of the home does not cover the balance of the loan.
If you are not the only heir, you may need to work together with the other heirs to keep or sell the home. There are deadlines on exercising your rights. We suggest that you consult with an attorney as soon as possible after the death of the borrower.