When a Reverse Mortgage loan becomes due and payable the estate has a few options in regards to how they can settle the amount owed to the loan servicer. If the estate (typically the kids) decide that they want to keep the house this is how they should proceed:

Contact the loan servicing company (the people who send out the monthly statement) and find out exactly how much the principle balance (amount owed on against the property) is. Also find out what the time frame is for paying back that amount and what steps need to be taking to file for an extension of that time frame if needed.

  1. Decide how they are going to pay back the principle balance. Typically this would be done by either paying back the amount owed from assets that the kids currently have, or it would be done by refinancing the home with a conventional mortgage.
  2. Once the funds have been gathered the estate pays off the principle balance against the home and the liens placed on the property by FHA are removed.

Overall the myth that FHA or the lender is going to take your home is really fruitless as theses are not organizations that are in the business of home sales. What they want more than anything is to repaid the amount they are owed and to not have to deal with the hassle of foreclosing on the property. They are usually very understanding and will work with your estate to make sure that plenty of time is given to repay the amount owed.