Keep the House

• If your parents are co-borrowers on the reverse mortgage and your father is still alive, he may remain in the home and continue to receive monthly payments. Only after all borrowers have passed will the reverse mortgage come due (all borrowers must be age 62 when the loan is originated). If all of the borrowers have passed, the heirs may elect to keep the home by paying the full loan balance due, even if the loan balance is greater than the value of the home. Heirs have one year to repay the loan, and lenders may elect to work with the heirs to provide new funding to pay off the balance.
  
  

Selling the Property

• There is also a one-year time limit in the event that the heirs decide to sell. Extensions are given in three-month increments. If the homeowner received -- or borrowed -- more than the value of the home and the heirs decide to sell, then the lender is entitled only to receive sale proceeds. What this means is that the lender cannot come after the estate or heirs for a deficient balance in the event that the appraised value is less than the loan balance.
  
  

When the Home Doesn't Sell

• If 12 months have passed and the heirs are neither able to purchase nor sell the residence, the heirs are protected. The heirs may decide to let the reverse mortgage foreclose, or they may decide to attempt a deed in lieu of foreclosure. The heirs' credit will not be damaged by either proceeding. When the lender takes a loss on a reverse mortgage, the website Best Reverse Mortgage states that the U.S. Department of Housing and Development pays as an "assignment insurance claim" to the lender for home equity conversion loans in the amount of the deficient balance. HUD will pay the claim only if the heirs elect to sell or let the home foreclose.
  
  

Non-Recourse Loans

• The reason that heirs aren't required to come up with a deficient balance is because most reverse mortgages are non-recourse loans. "Non-recourse" means that the property "stands for itself," according to the MLS Reverse Mortgage website. Since many borrowers elect to have payments continue for as long they occupy the residence, it is likely that the loan balance may exceed the property value. However, if it doesn't and there is equity left in the home upon the borrowers' death (or if she moves), then the heirs are able to keep the money that's left after the house is sold.