Inherited a house with a reverse mortgage? Here is how the clock works.

Published October 6, 2026 · Velocity House Buyers, Montgomery, NY

First, find out which kind of reverse mortgage it is

Almost every reverse mortgage on a Hudson Valley or North Jersey house is a Home Equity Conversion Mortgage, or HECM. It is insured by the Federal Housing Administration, and the rules in this guide come from HUD’s regulations for that program. You can usually confirm it from the closing papers in your parent’s files or from the servicer’s first letter, which will mention FHA or HUD.

New York also allows proprietary reverse mortgages, sometimes called jumbo reverse mortgages, made under Real Property Law sections 280 and 280-a. According to the Department of Financial Services, no federal or state agency stands behind those loans. The HUD timelines and the 95 percent rule described below do not automatically apply to them; the loan documents do. If the paperwork never mentions FHA, ask the servicer directly which type it is before you plan anything.

Why the loan is suddenly due

A HECM doesn’t require monthly payments while the borrower lives in the house. It becomes due and payable when the last surviving borrower dies (or when an eligible non-borrowing spouse no longer qualifies to stay). The balance is not what your parent originally borrowed. Interest compounds, and the mortgage insurance premium and any money the servicer advanced, such as property taxes or insurance it paid, are added on top. That is why the payoff figure often surprises families.

The timeline heirs actually face

Under HUD’s rule (24 CFR 206.125), the servicer first notifies HUD that the loan is due, then sends the estate and heirs a due-and-payable notice. From the date of that notice you have 30 days to tell the servicer which way you are going:

• Pay it off and keep the house, usually by refinancing into a loan of your own.
• Sell the house and pay the loan from the proceeds.
• Hand the house to the lender through a deed in lieu of foreclosure.

Thirty days is not the deadline to close. It is the window to respond. The servicer then has six months from the due date to start foreclosure, and HUD can approve more time. HUD’s own guidance for heirs says lenders may grant 90-day extensions when the estate shows it is actively selling or paying off the loan. In practice that documentation is something like a signed purchase contract, a listing agreement or a loan application, so the sooner one of those exists, the better.

Put the requests in writing, keep copies, and note who you spoke with. Servicers change staff and lose faxes. A paper trail is what gets an extension approved.

Is there equity, or is the house underwater?

This one question decides almost everything else. Ask the servicer for a written payoff statement and compare it with a realistic value for the house as it stands today, not as it looked in 1995.

If the house is worth more than the loan

This is the simpler case. The estate can sell to any buyer at any price it accepts. At closing the title company pays the servicer the full balance, and whatever is left belongs to the estate. Every month of delay costs real money, though, because interest keeps compounding until the payoff date, while the estate is also paying for insurance, heat and upkeep on a house nobody lives in. We cover those carrying costs in more detail in selling a vacant house.

If the loan is bigger than the house is worth

Here the federal insurance your parent paid for over the years does its job. The CFPB explains that heirs can satisfy the loan by selling the home for at least 95 percent of its appraised value, even if the balance is higher, and the FHA mortgage insurance covers the shortfall. The servicer orders that appraisal from an FHA-roster appraiser within 30 days of your request, so ask for it as soon as you know you want to sell.

Two things follow from that rule. First, in an underwater estate the heirs normally walk away with nothing from the sale, but they also owe nothing. Second, a buyer’s offer below the 95 percent figure will not be approved, no matter how fast that buyer can close. We would rather tell you that on the first call than waste a month of your extension.

Who can sign while the estate is still open?

The servicer will talk to the family, but a deed has to be signed by someone with legal authority. In New York that means an executor or administrator holding letters from the Surrogate’s Court in the county where your parent lived. For an Orange County resident, that is the Surrogate’s Court in Goshen; Ulster, Dutchess, Rockland, Putnam and Westchester each have their own. In Bergen and Passaic counties it runs through the county Surrogate, and New Jersey usually adds an inheritance tax waiver before the house can transfer. Our guide to selling an inherited house walks through both states.

Letters can take longer than the servicer’s 30-day window. That gap is exactly what the extensions are for. A contract can be signed by the person who is about to be appointed, conditioned on the letters, and closed once they arrive. Sending the servicer a copy of that contract and the probate petition helps show the estate is actively selling.

What happens if nobody acts

Foreclosure in New York and New Jersey goes through the courts, which you can read about on our foreclosure page. For HECMs, New York’s Real Property Law section 280-d makes the lender confirm it has HUD’s approval to accelerate the loan before filing, and it must follow HUD’s loss-mitigation rules. One protection works differently than many families expect: New York’s mandatory settlement conference (CPLR 3408) applies to a death-triggered reverse mortgage foreclosure only when a surviving spouse lives in the house, or an heir who was living there when the borrower died. If the house sat empty, there may be no conference at all.

A foreclosure auction is rarely the best outcome when there is equity. DFS notes that heirs can claim any surplus left after the auction pays the loan, but a courthouse sale seldom brings full value, and the legal fees and added months of interest come out of the balance first. If the house is underwater, a deed in lieu is often cleaner than a foreclosure for everyone. That is a conversation for the estate attorney.

Why these houses tend to need work

Most reverse mortgage borrowers are older owners who stayed in place for decades, and the houses show it: original kitchens, a tired boiler, an oil tank, a roof that was going to be “next year’s project.” Financed buyers often can’t close on that kind of house, and repairs are hard to justify when the payoff clock is running and the estate’s cash is tied up. That is where a direct sale can fit. We buy as-is, with the contents still inside if needed, and price the repairs into the offer rather than asking the family to do them. More on how condition shapes a price is on our repairs page.

A sale to us, step by step

1. Send us the payoff statement, or just the address, and tell us where the estate stands with the court.
2. We walk the house and put an offer in writing, normally within a day of seeing it.
3. If the loan is underwater, we compare our number with the 95 percent floor once the servicer’s appraisal comes back, and tell you honestly whether we can meet it.
4. The estate signs a contract, and you send a copy to the servicer to support an extension.
5. Once the executor or administrator has authority, we close through a title company and attorneys. With clean title we can close in as little as about seven days; estates often need longer, and we schedule around the court, not the other way around.

The whole process, from the first call to the wire, is laid out on how it works. If you are in or around Orange County, Greg or Brett will come out to see the house themselves.

We are home buyers, not attorneys or tax advisors. Reverse mortgage estates mix federal loan rules, Surrogate’s Court procedure and tax questions, such as how the house’s value at the date of death affects any gain, so please bring in an estate attorney and an accountant. Our FAQ covers the general questions we hear most.