Your father went into assisted living in the spring. The house has a reverse mortgage on it and everybody assumed it could sit there until something was decided. There is a clock running on that house and it started the day he left, not the day anybody thinks about it.
This article covers the twelve month rule, what happens when it runs out, who is allowed to stay in the house, and the decision that has to be made well before the deadline rather than after it.
We buy houses, so read the last section knowing that. We are not attorneys, not HUD-approved counsellors and not your loan servicer. Reverse mortgage rules are federal and your loan documents govern. Free HUD-approved housing counselling exists for exactly this and is listed at hud.gov. If Medicaid is also involved, take advice before selling anything, because a sale can affect eligibility.
The twelve month rule
A Home Equity Conversion Mortgage, which is what most reverse mortgages are, requires the home to remain the borrower's principal residence. The Consumer Financial Protection Bureau sets out what that means in practice.
A HECM must be repaid when the last surviving borrower no longer lives in the home as their principal residence, meaning where they live for the majority of the year. The Bureau is specific about care: if the borrower is away for more than twelve consecutive months in a healthcare facility such as a hospital, rehabilitation centre, nursing home or assisted living facility, and there is no co-borrower living in the home, the loan must be repaid.
Twelve consecutive months. The clock starts when they leave, and nobody sends the family a reminder at month nine.
Two words in that sentence matter. Consecutive means a genuine return home resets it, so a short stay at home between placements is not a technicality, it is the whole difference. And co-borrower means a second person actually on the loan, not simply a spouse or a relative living in the house.
Nobody is trying to catch you out. A servicer will normally send an annual occupancy certification, and the sensible move is to tell them in writing what has happened rather than wait to be asked.
Who can stay in the house
This is the question that decides whether there is a decision to make at all.
A co-borrower living in the home. If the other borrower is still there, the loan is not due. This is the common case for a couple where one needs care and the other stays home.
An Eligible Non-Borrowing Spouse. A spouse who was not on the loan may be able to remain without paying it off, depending on when the loan was taken out and whether they meet HUD's conditions. The Bureau itself says qualifying can be difficult and suggests contacting an attorney or a HUD-approved housing counselling agency. Do that early rather than after a deadline.
Everybody else. An adult child living in the house, a partner who was never a spouse, a tenant. The Bureau is blunt: anyone living with the borrower has to move out unless they can repay the loan or qualify as an Eligible Non-Borrowing Spouse. That is a hard conversation and it is better had in month two than month eleven.
The three ways it ends
Sell the house and repay the loan. If there is equity, the loan is repaid from the proceeds and the difference belongs to your father, or to his estate later. This is the ordinary outcome where a modest draw was taken against a house owned outright.
Repay it another way and keep the house. Refinancing in a family member's own name, or paying the balance in cash. Worth pricing properly, because a HECM balance grows and an older house may need work before any lender will finance it.
Hand it back with a deed in lieu of foreclosure. Title goes to the lender, the debt is satisfied, and nobody owes anything further. Where the balance is close to or above the value, this is frequently the cleanest exit and it costs the family nothing.
There is a fourth thing that happens, and it is not a choice. Doing nothing ends in foreclosure. Once a loan is due and payable the lender is required to move, generally within six months of the notice unless additional time is approved, so silence does not buy the family a year.
What is actually owed
A HECM is non-recourse. Neither your father nor his heirs can owe more than the property is worth. If the balance exceeds the value, the FHA insurance covers the gap rather than the family.
Where the family wants to keep it and the loan is underwater, the amount to repay is the full balance or 95 per cent of the current appraised value, whichever is less.
Interest and the mortgage insurance premium keep accruing throughout, so a payoff figure obtained in March is not the figure in September. Ask the servicer for one in writing with a good-through date.
The other way it becomes due, which nobody watches
The twelve month rule is not the only trigger, and while a family is focused on care the second one creeps up quietly.
A reverse mortgage requires the borrower to keep paying property taxes and homeowner's insurance and to keep the property maintained. Failing to do so is itself a reason the loan becomes due and payable, after notice and an opportunity to put it right.
An empty house makes both harder. The tax bill still arrives and there is nobody at the address to open it. The insurer, told nothing, may restrict or exclude cover once the property has been unoccupied for a period, which our article on vacant property insurance covers. Maintenance stops because nobody is there to notice a leak.
So while the family is deciding, somebody has to actually do three things: redirect the post, keep the taxes paid, and tell the insurer the house is empty. Our page on Tulsa County property tax dates has the deadlines, and our page on selling a vacant house covers the wider problem of a house standing empty.
What to do this month
- Work out the date he left and count forward twelve months. That is your deadline, not an estimate
- Write to the servicer setting out the position and asking what they require. Keep the letter
- Ask for a written payoff figure with a good-through date
- Speak to a HUD-approved housing counsellor. Free, independent, and they handle this every week
- Establish whether anybody in the house can stay, before anybody starts packing or listing
- Check whether Medicaid is involved. If care is being funded by Medicaid, a sale can affect eligibility, and that needs advice before rather than after
- Find out what the property is realistically worth, because every option depends on it
If your father may return home, say so to the servicer. A genuine return changes the position and it is worth establishing rather than assuming.
Where we come in
If there is real equity and time on the clock, list it. A house in ordinary condition sold on the open market will net more than we will pay, and the twelve months exists precisely so that a family is not forced. We will say so on the phone.
If the balance is close to or above the value, do not sell to anybody. Ask the servicer about a deed in lieu. It settles the debt, costs the family nothing, and takes less work than arranging a sale. There is no version of that where selling to us helps you.
The narrow case where we are useful: real equity, a deadline that is now close, and a house that has stood empty through a long illness and needs work nobody can fund or manage from another state. Our page on selling a parent's house covers the practical side, and our article on a reverse mortgage after a death covers what happens if he dies before this is resolved, which changes the timetable again.
The short version
- A HECM becomes due when the borrower has been away more than twelve consecutive months in a healthcare facility and no co-borrower lives in the home
- The clock starts the day they leave. A genuine return home resets it
- A co-borrower or an Eligible Non-Borrowing Spouse may be able to stay. Anybody else has to leave unless they can repay
- Qualifying as an Eligible Non-Borrowing Spouse can be difficult, so get help early
- Three real endings: sell, repay another way, or hand it back with a deed in lieu
- Non-recourse. Nobody in the family owes more than the house is worth
- HUD-approved counselling is free and it is the right first call
- If Medicaid is paying for care, take advice before selling anything
Frequently asked questions
What happens to a reverse mortgage if the borrower goes into a nursing home?
It becomes repayable once they have been away more than twelve consecutive months in a healthcare facility and no co-borrower lives in the home, because the property is no longer their principal residence.
Does the twelve months have to be continuous?
Yes. The Consumer Financial Protection Bureau refers to twelve consecutive months, so a genuine return home resets the position rather than merely pausing it.
What counts as a healthcare facility?
The Bureau lists a hospital, rehabilitation centre, nursing home or assisted living facility.
When exactly does the clock start?
When the borrower stops living in the home as their principal residence, which in practice is the day they leave. Nobody sends a reminder at month nine.
What if my mother is still living there?
If she is a co-borrower on the loan, it is not due. If she was not on the loan, she may be able to stay as an Eligible Non-Borrowing Spouse, which is worth establishing straight away.
How hard is it to qualify as an Eligible Non-Borrowing Spouse?
The Bureau itself says it can be difficult and suggests contacting an attorney or a HUD-approved housing counselling agency. Do that early, not after a deadline.
Can an adult child stay in the house?
Not unless they can repay the loan. The Bureau is clear that anyone living with the borrower has to move out unless they repay or qualify as an Eligible Non-Borrowing Spouse.
Should I tell the servicer?
Yes, in writing. Servicers send an annual occupancy certification anyway, and a family that is visibly dealing with it is treated very differently from one that has gone quiet.
What are the options once it is due?
Sell and repay from the proceeds, repay another way and keep the house, or hand it back with a deed in lieu of foreclosure. Doing nothing ends in foreclosure.
What if the loan is worth more than the house?
A HECM is non-recourse, so nobody in the family owes the shortfall. A deed in lieu settles it and costs the family nothing.
What is the 95 per cent rule?
Where the family keeps a home whose balance exceeds its value, the amount repayable is the full balance or 95 per cent of the current appraised value, whichever is less.
Does the balance keep growing?
Yes. Interest and the mortgage insurance premium continue to accrue, so a payoff figure goes stale. Ask for one in writing with a good-through date.
How long do we have once it is due and payable?
Not indefinitely. Once due, the lender is required to move, generally within six months of the notice unless additional time is approved, so silence does not buy the family a year.
Can we get an extension to sell?
Additional time can be approved, and a family that is visibly marketing the property has a far better case. Ask in writing before the deadline and keep evidence.
What if my father might come home?
Say so to the servicer. A genuine return changes the position, and it is worth establishing rather than assuming either way.
Medicaid is paying for his care. Does that change things?
Potentially a great deal. Sale proceeds are countable, so a sale can affect eligibility. Take advice from a Medicaid planning attorney before selling anything.
Who pays the taxes and insurance meanwhile?
They still have to be paid, and failing to pay them is itself a reason a reverse mortgage becomes due. Tell the insurer the house is unoccupied.
Do we need probate to sell?
Not while the borrower is alive, but somebody needs the authority to act for them, usually a power of attorney. Check that it actually covers a conveyance.
Is a proprietary reverse mortgage the same?
No. Only HECMs follow the federal rules described here. A proprietary reverse mortgage from a private lender follows its own contract, so check which one it is.
Should we sell to a cash buyer?
Only where there is real equity and the deadline is close. With equity and time, listing normally nets more. With no equity, a deed in lieu beats any sale.
What happens if he dies before this is resolved?
The loan becomes due on the death of the last borrower instead, and the heirs' timetable applies. It is a different process with different deadlines.
Where can we get free help?
HUD-approved housing counselling, listed at hud.gov, is free and independent. For the elder care side, the Long-Term Care Ombudsman and the Area Agency on Aging also cost nothing.
We buy houses, so read the last section knowing that. We are not attorneys, not HUD-approved counsellors and not your servicer. Reverse mortgage rules are federal and your loan documents govern. Free HUD-approved counselling is listed at hud.gov. If Medicaid funds the care, take advice before selling.
A deadline you did not choose?
We buy houses on a servicer's timetable, including ones that have stood empty through a long illness.
- A written offer within 24 hours, not a range on the phone
- No repairs, no cleaning, no fees, and no showings
- If listing would net you more, we say so
No fees, no obligation, and your property is never listed publicly.