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■ Free Guide for Families

Reverse Mortgage Guide
for Heirs in Maryland:
What to Do When a Parent Passes Away

A calm, plain-English guide for Maryland heirs. What to do first, how much time you have, what you can owe, and your choices.

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Ed Drost · MD License #30004874 · 37+ Years Appraising in Maryland · Estate · Probate · Date-of-Death
BaltimoresTrustedAppraiser.com › Free Guides › Reverse Mortgage Guide for Heirs in Maryland
Articles & Blog

Read These Related Articles First

What Happens to a Reverse Mortgage When the Borrower Dies?

The blog article that introduces this guide, by an FHA appraiser.

What Is a Date of Death Appraisal in Maryland?

Why heirs and executors need one, with a worked tax example.

How Does the IRS Stepped-Up Basis Work?

How an inherited home's tax value resets and can save you money.

Can You Get a Retrospective Appraisal Years Later?

Yes, and here is how it works if the death was a while ago.

Appraisal vs. CMA for Probate

Can an agent's market analysis stand in for an appraisal?

Deeper dives: How the HUD 95% Rule Works on a Reverse Mortgage · How to Dispute a Reverse Mortgage Appraisal (ROV Checklist) · Do Heirs Need Probate to Sell a Reverse Mortgage Home in Maryland? · Date-of-Death Appraisals for Reverse Mortgage Homes

See all articles and blog posts → · Estate & Probate Guide

The short answer
You will not lose the house overnight, and you will not owe money out of your own pocket. Most reverse mortgages are federally insured and "non-recourse," which means you can never owe more than the home is worth. You usually have about 6 months (up to about 12 with extensions) to sell the home, keep it, or hand back the keys. Call the loan company, protect the house, and get legal permission to act for the estate.
ED

Written by Ed Drost · Maryland Certified Residential Appraiser · License #30004874

Appraising Baltimore-area homes since 1989 · Estate · Probate · Date-of-Death · 443-904-5229

The good news First steps The 95% rule Your 4 choices How much time Home value Mistakes to avoid Who can help Questions

First, I am sorry about your loss. Dealing with a loan on top of grief is hard, and the letters from the loan company can sound scary. I have helped Maryland families through estates for more than 37 years. This guide explains what is going on in everyday words, so you can make a calm, informed decision.

This guide is about the most common type of reverse mortgage, the federally insured kind called a HECM. If your parent's loan was a private (non-HECM) reverse mortgage, the rules in the loan papers may be different, so check with an attorney.

Quick answer for Maryland heirs: When the last borrower on a reverse mortgage (HECM) dies, the loan becomes due and payable. The servicer usually sends a notice and asks for a response within about 30 days, and heirs normally get about six months to sell, pay off, or hand back the home, with extensions possible if they show progress. Heirs never owe more than the lesser of the loan balance or 95% of the appraised value.

Deadlines are set by HUD and your servicer and can change, so confirm them in writing with the servicer.

Maryland Heirs: Your Plan at a Glance

Phase 1: Days 1–30. Notify and gather.

  • Call the servicer, give the date of death, and send a death certificate when asked.
  • Ask in writing for the payoff balance, the loan documents, and a copy of the servicer's appraisal.
  • Keep the house secured, insured and maintained, and keep paying the taxes and insurance if the servicer says to.

Phase 2: Months 2–3. Establish authority and get the value.

  • Ask the Maryland Register of Wills whether your parent's estate needs to be opened and who can be appointed personal representative. Questions about disputes usually go to the Orphans' Court. Ask a Maryland estate attorney about your situation.
  • Compare the servicer's appraisal with the home's real value. If you disagree, you can ask for a reconsideration of value. See how to dispute a reverse mortgage appraisal.
  • Talk to a HUD-approved housing counselor (free or low cost) and an estate attorney.

Phase 3: Months 4–6 and beyond. Decide and finish.

  • Pick one of the four choices below: sell, keep it by paying off or refinancing, buy it at 95% of appraised value, or hand the home back with a deed in lieu.
  • If you need more time, ask the servicer for an extension in writing and send proof of progress, such as a listing agreement or contract.
  • Questions about the lender or servicer can go to the Maryland Office of the Commissioner of Financial Regulation, and to the CFPB.

Baltimore note: many older Baltimore rowhouses carry ground rent, which can affect title and value. Mention it to your attorney and to the appraiser.

The good news first

Words you will see in the letters

ServicerThe company that handles the loan and sends you the letters.
Due and payableThe loan now has to be settled. It starts a clock, but it does not mean you must pay it all today.
Non-recourseThe lender can only collect from the house, never from you personally.
Payoff amountWhat the loan balance is today. It grows a little each day because of interest.
AppraisalA professional opinion of what the home is worth.
Personal representativeThe person the court names to act for your parent's estate. Also called an executor.
First 30 Days

What to Do First: 6 Simple Steps

1

Get legal permission to act

Find out who is allowed to act for your parent's estate. In Maryland, that usually means opening an estate with the Register of Wills in the county where your parent lived. Without this, the servicer may not be able to talk to you or accept a sale.

2

Call the loan company

Use the phone number on your parent's loan statement. Tell them about the death, ask for the payoff amount, and ask for their "heir package" or checklist. Write down the date, the time, and the name of every person you speak to.

3

Keep the house safe

Lock it, keep the homeowner's insurance active, pay property taxes and utilities, and keep it in decent shape. Tell the insurance company the owner has passed, because an empty home often needs special coverage.

4

Find out what the house is worth

Ask the servicer for a copy of its appraisal. If the number looks too high or too low, a second opinion from a local certified appraiser can back up your case.

5

Pick one of the four choices

Sell, keep, hand back the keys, or let the lender foreclose. The next section explains each one.

6

Ask for more time in writing

Before the 6-month deadline, send the servicer proof of progress and ask for each 90-day extension in writing. Keep copies of everything.

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Do not ignore the mail. Open every letter from the servicer and answer it. Silence is the fastest way to lose extra time.
The Most Important Rule

The 95% Rule, Explained Simply

To settle the loan, heirs only have to pay the smaller of two numbers: what is owed on the loan, or 95% of what the home appraises for. That is why the appraisal matters so much. The appraised value sets your price.

Example: The Loan Is Bigger Than the House
What your parent owed
$380,000
The loan balance, with interest added over the years
→
What you pay (95% of $300,000)
$285,000
The home appraises at $300,000, so 95% is $285,000
The $95,000 difference is covered by FHA insurance. You never owe it.

And if the home is worth more than the loan? Then you simply pay off the loan balance and keep the rest. Example: a $400,000 home with a $260,000 loan leaves about $140,000 for the estate, before the costs of selling.

Your Options

Your 4 Choices

1. Sell the home

List it with an agent. At closing, the loan is paid from the sale money. If the home is worth more than the loan, the family keeps the extra. If the loan is bigger, the servicer will usually accept a sale at 95% of the appraised value or better.

2. Keep the home

Buy it from the estate or get a regular mortgage. You pay the lesser of the loan balance or 95% of the appraised value. If several heirs are involved, agree in writing on who is buying out whom.

3. Hand back the keys

Called a "deed-in-lieu." You sign the home over to the lender. It is a clean way out if the home is far underwater and you do not want to deal with a sale. The home usually has to be empty and free of other liens.

4. Let the lender foreclose

You are not personally responsible for any shortfall, because the loan is non-recourse. The downsides: you give up any equity and control over the outcome, and anything left in the house may be lost. Take what matters first.

The Clock

How Much Time Do You Have?

~30 Days
The servicer sends its notice after learning of the death. Call them first so you hear it from you.
~6 Months
Your starting window to sell, keep, or hand back the home.
~12 Months
Usual maximum, with two 90-day extensions when you show real progress.

Extensions are not automatic. You normally have to show proof you are moving forward, such as a probate filing, a signed listing agreement, a sales contract, or a loan application. Ask the servicer exactly what papers they want, and ask before your deadline, not after.

Interest keeps building on the loan the whole time, so waiting makes the payoff larger. HUD sometimes allows more time in special cases, and the rules can change, so confirm the current deadlines with your servicer.

A surviving spouse may be able to stay. If your parent's husband or wife was not on the loan but meets HUD's "Eligible Non-Borrowing Spouse" rules, the loan may be put on hold so they can stay in the home. Raise this with the servicer immediately.

Home Value

The Appraisal: Why It Matters to You

Because the 95% rule is based on the appraised value, a few thousand dollars either way changes what you pay. Here is how it works:

Avoid These

7 Mistakes Heirs Make

⚠
1. Ignoring the letters. You can lose extension time you were entitled to.
⚠
2. Paying the full balance out of your own pocket. If the loan is bigger than the house, the 95% rule may let you pay far less.
⚠
3. Listing the house before you have legal authority. Get the estate opened first.
⚠
4. Letting the insurance lapse. An empty house often needs special coverage. Call the insurance company.
⚠
5. Taking the first cash offer. Investors who call after a death may offer far less than the home is worth. Compare any offer to the appraised value.
⚠
6. Putting a house with no equity into your own name. If you plan to walk away, do not deed the house to yourself first. Owning it can make you responsible for HOA dues and code fines while the foreclosure plays out. Talk to a probate attorney before any transfer.
⚠
7. Assuming every reverse mortgage works the same. Private reverse mortgages follow their own contract rules and may not offer the 95% rule.
You Do Not Have to Do This Alone

Who Can Help

Your Support Team
✓
HUD-approved housing counselor: free or low-cost help. HUD's housing counseling line is 800-569-4287.
✓
Probate or estate attorney: gets legal authority in place and reviews any deed or payoff papers.
✓
CPA or tax attorney: explains the tax value reset and any sale taxes.
✓
Certified appraiser: a date-of-death value or a second opinion on the servicer's number. That is me. Call 443-904-5229.
✓
Consumer Financial Protection Bureau: consumerfinance.gov, if the servicer is not responding or is mishandling your file.
✓
Maryland Register of Wills: in your parent's county, for opening the estate.

Questions to ask the servicer (get the answers in writing)

Frequently Asked Questions

Reverse Mortgage Questions Heirs Ask Most

What happens to a reverse mortgage when the borrower dies?
The loan becomes due. The loan company (called the servicer) will send you a letter, usually within about 30 days of learning about the death. You then have about 6 months to sell the home, keep it by paying off the loan, or give it back. With proof that you are making progress, you can usually ask for extra time, up to about 12 months in total. You do not lose the house right away.
Do I have to pay back my parent's reverse mortgage out of my own pocket?
No. Most reverse mortgages are federally insured (HECM loans) and are "non-recourse." That means you can never be made to pay more than the home is worth. If the loan is bigger than the house, the government insurance covers the rest. The lender cannot go after your savings, your paycheck, or your own property.
How long do I have to pay off or sell?
Plan on about 6 months from the date on the due-and-payable letter. You can ask for up to two extra 90-day periods (about 12 months total) if you can show real progress, like a home listing agreement, a probate filing, or a loan application. Ask for every extension in writing, and ask before the deadline runs out.
What is the 95% rule?
It is a HUD rule that lets heirs pay off the loan for the lesser of two numbers: the full loan balance, or 95% of what the home appraises for. If your parent owed more than the house is worth, you pay only 95% of the appraised value, and the FHA insurance fund covers the rest.
Can we just walk away from the house?
Yes. You can sign the house over to the lender (called a deed-in-lieu of foreclosure) or let the lender foreclose. Because the loan is non-recourse, you will not owe the difference, and since you were not the borrower, it generally does not hurt your own credit. Take out anything you want to keep first, such as photos, papers, and family keepsakes.
Do I need an appraisal?
The loan company will order its own appraisal to set the 95% number. Many families also hire their own independent appraiser, for two reasons: to double-check the lender's value, and to document the home's value on the date of death, which can lower the taxes owed when you later sell.
What if my parent's spouse is still living in the home?
A surviving spouse who was not on the loan may be allowed to stay if they qualify as an "Eligible Non-Borrowing Spouse." Generally that means they were married to the borrower when the loan closed, were named in the loan papers, and still live in the home as their main residence. If they do not qualify, they are treated like any other heir. Call the servicer right away to find out.
Can I refinance the reverse mortgage and keep the house?
Yes. You apply for a regular mortgage like any other buyer. The new loan only needs to cover the lesser of the balance or 95% of the appraised value. You will first need legal authority over the home through the probate court or a trust.
How do I sell the house?
The estate lists the home the normal way. At closing, the title company pays off the reverse mortgage from the sale money, and any money left over goes to the estate and the heirs. If the loan is larger than the home's value, the sale can still close as long as the buyer pays at least 95% of the appraised value and the servicer agrees.
How long until the bank can foreclose?
Foreclosure usually does not start until the response and extension time is used up, often 6 to 12 months after the death, and only if you have stayed in touch with the servicer. After that, state law controls the process, and it can still take several more months before any auction.
Can I live in the house while I sort this out?
Generally yes, during the response and extension period. Interest keeps adding up on the loan, and you must keep the home locked, insured, and in decent shape.
What if the family cannot agree on what to do?
Ask the Maryland Register of Wills about having a personal representative appointed. Write down any agreement about who is buying or selling before you talk to the servicer. If the heirs disagree on the home's value, a certified appraisal gives everyone the same neutral number to work from.
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Please note: This guide is general education, not legal, tax, or financial advice. HUD rules and servicer procedures change, and every loan is different. Confirm current requirements with your servicer, a HUD-approved counselor, and a qualified attorney. An appraiser can tell you what a home is worth but cannot advise you on legal or tax matters.
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Last updated: October 2026 · Ed Drost · Maryland Certified Residential Appraiser · License #30004874