When a Florida parent or grandparent dies with a Home Equity Conversion Mortgage (HECM) reverse mortgage, their adult children often receive a notice from the servicer that the loan is "due and payable." The notice arrives alongside grief, and the 6-month deadline can feel impossible.
The good news: heirs have more options than most realize, and the FHA non-recourse guarantee means you can never owe more than the home is worth -- even if the loan balance has grown larger than the property value. This guide explains your choices, deadlines, and how to avoid an unnecessary foreclosure on an inherited Florida home.
What Is a HECM Reverse Mortgage?
A HECM (Home Equity Conversion Mortgage) is the only type of reverse mortgage insured by the Federal Housing Administration (FHA). It allows homeowners aged 62 or older to borrow against their home equity without making monthly mortgage payments. The loan balance grows over time as interest and mortgage insurance premiums accrue.
The loan becomes due and payable when the last surviving borrower dies, moves permanently out of the home, fails to pay property taxes or homeowners insurance, or fails to maintain the property. For heirs, the most common trigger is the death of the last borrower.
The 6-Month HUD Option Period
When a HECM borrower dies, HUD guidelines give heirs a minimum of 6 months from the date of death to take one of three actions:
- Sell the home and use the proceeds to pay off the HECM balance
- Refinance the HECM into a conventional or FHA forward mortgage to keep the home
- Pay the HECM balance in cash (including the 95% option, discussed below)
This 6-month period can be extended up to 12 months total if the heir demonstrates active steps toward resolution -- such as listing the home with a licensed real estate agent or submitting a refinance application. Heirs should contact the servicer immediately after the borrower's death, document their actions, and request extensions in writing if needed.
The FHA 95% Rule: A Critical Protection for Heirs
Many Florida heirs are unaware of the FHA 95% rule. Under HUD guidelines, if the HECM loan balance exceeds the home's current appraised value, an heir who wants to keep the property can satisfy the loan by paying 95% of the current appraised value -- not the full loan balance.
Example: the home is appraised at $280,000 and the HECM balance is $340,000. The heir can pay $266,000 (95% of $280,000) to satisfy the loan in full. The lender accepts this because FHA insurance covers the $74,000 gap. The heir refinances into a conventional mortgage for $266,000 and keeps the home.
This rule makes it financially feasible to keep an underwater inherited property when the heir wants to preserve the family home and can qualify for a refinance.
FHA Non-Recourse Protection: You Cannot Owe More Than the Home Is Worth
The HECM's FHA non-recourse guarantee is the most important protection heirs have. It means:
- If the home sells for less than the loan balance, FHA insurance covers the shortfall -- heirs owe nothing further
- No deficiency judgment can be entered against heirs personally (unlike conventional mortgage foreclosures under Florida F.S. 702.06)
- Heirs' personal assets, bank accounts, and income are fully protected
This is a fundamental difference from conventional mortgages. Heirs who inherit an underwater home with a conventional mortgage may face deficiency exposure. Heirs who inherit a HECM-mortgaged home do not. See our guide on deficiency judgments in Florida for how the conventional deficiency rules work.
Selling the Home: The Most Common Resolution
Most heirs resolve a HECM by selling the home. The process works like any other home sale, with one important difference: the servicer must approve the payoff timeline, and the sale must close within the option period (or an approved extension).
If the home has equity (value exceeds the HECM balance plus fees), the heirs keep the surplus after closing. If the home is underwater, the FHA non-recourse guarantee means the sale still closes and discharges the debt -- with no money out of pocket from the heirs.
Barrett Henry, Broker Associate at REMAX Collective, has helped heirs navigate the sale of reverse-mortgaged properties throughout Tampa Bay and statewide. Contact us at Florida Foreclosure Help for a free consultation on pricing and timeline.
Probate, Multiple Heirs, and Coordination Challenges
The practical challenge in many Florida HECM inheritance situations is coordinating probate with the servicer's timeline. Key points:
- Open probate immediately and apply for letters testamentary so someone has legal authority to execute a sale or refinance
- Florida summary administration (for qualifying estates under F.S. 735.201) is faster than formal administration and may resolve in 4 to 6 weeks
- Multiple heirs must agree -- if they cannot, a partition action under F.S. 64.011 may be necessary; consult a Florida probate attorney quickly
- Notify the servicer of the probate filing and request a timeline extension in writing as soon as you have a personal representative appointed
Our guide on Florida probate and foreclosure covers what happens when a homeowner dies without a will and the property is in or near foreclosure.
Deed in Lieu for Heirs: The Fastest Exit on an Underwater Property
If the home is underwater and no heir wants to keep it or can sell it quickly, a deed in lieu of foreclosure is usually the fastest resolution. Heirs sign over the title to the servicer voluntarily, and the servicer releases all claims against the estate. Because the HECM is non-recourse, the heirs have nothing to lose financially by pursuing a deed in lieu -- and it typically resolves in 4 to 8 weeks rather than the 12 to 24 months of a Florida judicial foreclosure.
To pursue a deed in lieu, heirs should contact the servicer's loss mitigation department, indicate they are heirs and not personally on the loan, and ask to initiate the deed-in-lieu process. The servicer will request a title search, property condition disclosure, and estate documents.
When Heirs Allow Foreclosure: What to Expect
If heirs take no action within the option period, the servicer files a judicial foreclosure in Florida circuit court. Because Florida is a judicial foreclosure state, this process currently takes 12 to 24 months from filing to sale under current court calendars.
During this time, the heirs have no legal obligation to pay property taxes, insurance, or maintenance (though the servicer may do so to protect the collateral, adding to the loan balance). The foreclosure is filed against the estate of the deceased borrower -- not against the heirs personally -- and does not appear on the heirs' personal credit reports.
Heirs who allow foreclosure simply to wait out the process are giving up the possibility of equity proceeds. If the home has any value above the HECM balance, it is almost always financially better to sell within the option period.
Checklist for Florida Heirs Dealing with a Reverse Mortgage
- Contact the HECM servicer within 30 days of the borrower's death and request a payoff statement and the name of the assigned case manager
- Order a certified copy of the death certificate and open probate in the appropriate Florida circuit court
- Order a current appraisal of the property (required for the 95% payoff option and for any HUD review of the loan balance)
- Decide among heirs: sell, refinance (95% option or conventional), deed in lieu, or allow foreclosure (not recommended unless truly underwater and probate is complex)
- List the home for sale if selling, and notify the servicer in writing with the listing agreement to preserve the 6-month extension option
- Contact a HUD-approved housing counselor (call 1-800-569-4287) for free guidance on your options as an heir
Barrett Henry on HECM Inheritance in Florida
Barrett Henry is a Broker Associate at REMAX Collective with 23+ years of real estate experience helping Florida families navigate reverse mortgage inheritance situations. He has guided heirs through estate sales of HECM properties throughout the Tampa Bay area -- from Hillsborough and Pinellas to Manatee and Sarasota counties -- and coordinates statewide via referral across all 67 Florida counties.
The most common mistake heirs make is waiting too long. The 6-month option period passes quickly when you are dealing with grief, probate, and family disagreements. Contacting a real estate professional and a HUD counselor in the first two weeks after a parent's death gives heirs the maximum time to evaluate their options and choose the best path.
Inherited a Florida home with a reverse mortgage? Contact us today for a free, no-obligation consultation on your options.
Related Resources
- Reverse Mortgage Foreclosure Florida: Complete Guide
- HECM Non-Borrowing Spouse Foreclosure Florida
- Deed in Lieu of Foreclosure Florida
- Deficiency Judgment in Florida
- Florida Probate and Foreclosure Without a Will
- Inheriting a House in Foreclosure in Florida
- Inherited Property Foreclosure Florida
- Heir Property Foreclosure in Florida
- Find a Free HUD Counselor in Florida
- Get Free Foreclosure Help Now
