Reverse mortgage, Texas
Selling a Texas Reverse-Mortgaged Home — Payoff Handled at Closing
When a HECM (Home Equity Conversion Mortgage) comes due — usually after a parent passes or moves to care — heirs get a 180-day window to settle the loan, with up to two 90-day extensions if the home is being actively marketed. Most heirs do not know they can satisfy the loan at the lower of the balance or 95% of appraised value, and that they are not personally liable for any shortfall. This page walks through the rules, the timeline, and what a cash sale looks like inside that window — calmly, with the dignity the situation deserves.
When a reverse mortgage becomes due
The four triggers that make a HECM due and payable
A reverse mortgage is not a regular loan with a monthly payment. The borrower draws against their equity for as long as they meet the conditions of the program, and the loan only becomes due and payable when one of four specific things happens. Knowing which trigger applies to your situation determines the timeline you are working against and what the servicer will be looking for from you. The borrower or borrower's family is rarely told all four triggers clearly at origination — most families learn them at the moment they need to act, which is the hardest possible time to absorb new information.
The borrower passes away
The most common trigger. The servicer is typically notified through standard death- record reporting or when family members reach out, and within 30 days of confirming the death they are required to send heirs a due-and-payable notice. The 180-day clock starts from the date the loan is called due, not from the date of death — those are often a few weeks apart in practice. If there is a surviving non-borrowing spouse who qualifies under HUD's 2014 rule changes, this trigger may not apply, and that conversation belongs with a HUD-approved HECM counselor before anything else.
The borrower moves out for 12+ months
HECM rules require the property to remain the borrower's principal residence. A move to assisted living, a long hospital stay, a stay with family that stretches into a permanent arrangement — once continuous absence crosses twelve months, the loan can be called due. Servicers typically run an annual occupancy certification to confirm the borrower is still living in the home. This is the trigger that catches families who move a parent into care and then leave the home empty for "just a year" while they figure out what to do.
Taxes, insurance, or HOA fall behind
The reverse mortgage does not pay the borrower's property taxes, hazard insurance, or HOA dues — the borrower remains responsible for those, even though they have no monthly payment on the loan itself. If those obligations go unpaid for long enough, the servicer can declare the loan in default and call it due. This is the trigger that hits borrowers whose income could not keep up with rising Texas property taxes, particularly in districts where the homestead exemption did not fully absorb the increase. Our tax-delinquent Texas page walks through how delinquencies stack on top of a reverse mortgage and what the resolution options are.
Property falls below FHA standards
HECM is an FHA-insured product, which means the property has to remain in habitable condition that meets minimum FHA property standards. Deferred maintenance — a failing roof, a non-functioning heating system, a structural issue — can put a HECM in default even if the borrower is still living there. This trigger is rare but real, and it shows up most often when an aging borrower is no longer physically able to keep up with the home and family is not yet involved enough to step in.
Your timeline as an heir or fiduciary
The 30-day, 180-day, and 360-day windows you actually have
The HECM rulebook gives heirs a more structured and more generous timeline than most families realize when they open the servicer's first letter. The numbers below are federal — set by HUD, applied uniformly across all HECM servicers, and binding on the lender unless the heir affirmatively walks away from the home. Knowing the dates means you can make decisions on a calendar rather than under emergency pressure. Mark them on a real calendar; do not try to hold them in your head while grieving.
Day 0 to Day 30 — respond to the servicer with intent
After the servicer mails the due-and-payable notice, heirs have approximately 30 days to respond with intent. The three options on the response form are usually: keep the property (and pay off the loan), sell the property (and use the proceeds to pay off the loan), or deed the property back to the lender (and walk away). You are not making a final decision in this 30-day window — you are telling the servicer which direction you are leaning so they know how to manage the file. Most servicers will work with you if you stay in communication; the bad outcomes come from heirs who let the letter sit on the counter for three months because they could not face it.
Day 0 to Day 180 — settle the loan (the standard window)
From the date the loan is called due and payable, the standard HECM rules give heirs 180 days — about six months — to settle it. "Settle" can mean repaying the loan in cash, selling the home and using the proceeds, or executing a deed-in-lieu of foreclosure. Six months is enough time for a typical cash sale; it is tight for a traditional retail listing if the home needs work or shows poorly. Most heirs we talk to are somewhere in month two or three when they reach out — past the initial shock, ahead of the deadline, trying to make a calm decision before the calendar forces a panicked one.
Day 180 to Day 360 — two 90-day extensions if you are actively marketing
If you are actively marketing the home — with a listing agreement, listing photos, an executed contract under negotiation, or comparable documented activity — the servicer can grant up to two 90-day extensions. The total available window grows to roughly 360 days from the due-and-payable date. Extensions are not automatic. You request them in writing, document the marketing activity, and stay in communication. The servicer wants to see that the property is moving toward a closing — they are not granting extensions to families who have not started the process yet.
Beyond 360 days — foreclosure becomes likely
If neither a sale nor a deed-in-lieu happens within the extended window, the lender will typically begin foreclosure. Texas foreclosure on a reverse mortgage proceeds under the same non-judicial process used for any deed-of-trust property — a Notice of Default, a Notice of Sale, and a posting on the courthouse steps. The non-recourse nature of HECM still protects heirs from personal liability, but the home is lost and any remaining equity that could have gone to the estate evaporates. The 360-day window exists specifically so families do not end up here.
These dates are general — your servicer's exact letter will spell out the specific numbers for your loan. If the letter has already arrived and the dates feel tight, contact a HUD-approved HECM counselor immediately (free) and call us in parallel. We can have a coordinated path on the table inside a week.
The 95% lesser-of rule
The most underused HECM heir benefit — explained plainly
If there is one fact every heir of a reverse-mortgage holder should know, it is this: you can typically satisfy the loan by paying the lower of the full balance or 95% of the home's current appraised value. The rule is codified in HUD's HECM regulations and reiterated in mortgagee letters that govern how servicers handle heir payoffs. It exists because HUD recognized that loan balances can outgrow home values over a long borrower lifetime, and that asking heirs (or third-party buyers acting on behalf of heirs) to cover the full balance in those cases would be punitive — the FHA insurance fund the borrower paid into for years is exactly what is supposed to absorb that gap.
How the math works
Suppose the borrower's reverse-mortgage balance has grown to $310,000 over fifteen years of monthly draws and accrued interest. The home today appraises at $260,000. Without the 95% rule, the loan balance exceeds the home value by $50,000 and the situation looks underwater. With the 95% rule, the heir (or a third-party buyer in arm's-length transaction) can satisfy the loan by paying 95% of $260,000 — which is $247,000. The remaining $63,000 gap between the satisfaction amount and the loan balance is covered by FHA mortgage insurance. The servicer accepts the $247,000, marks the loan as paid in full, and releases the lien. The numbers are illustrative — your specific situation depends on the servicer's appraisal.
When the rule helps and when it does not
The 95% rule helps when the loan balance is higher than the home value. When the home has appreciated enough that there is meaningful equity above the loan balance, the rule is irrelevant — you pay the loan balance from sale proceeds and the excess goes to the estate. Many North and East Texas reverse-mortgage payoffs we look at fall into the second category: home values rose enough over the last decade that heirs end up with equity, not a gap. But for borrowers who took out reverse mortgages in 2007-2010 in markets that did not recover well, or for borrowers who lived 20+ years against their equity, the 95% rule can be the difference between a clean payoff and a deed- in-lieu.
Non-recourse, in plain English
HECM loans are non-recourse. The home is the only collateral. If the home does not cover the loan even at 95% of appraised value — for example, because of severe condition issues that drive the appraisal lower than the 95% threshold would otherwise produce — the heirs are still not personally liable. The FHA insurance fund covers the lender. Heirs cannot have their own assets reached, cannot have judgments entered against them, cannot have their credit affected. The worst-case outcome for an heir who does nothing is losing the home through foreclosure — not personal financial damage.
Talk to a HUD-approved HECM counselor (free)
We are real estate buyers. We are fluent enough in HECM mechanics to coordinate payoffs at closing, and we understand the 95% rule well enough to factor it into our offer math when it applies — but we are not HECM counselors. HUD funds a network of approved counseling agencies (search "HUD HECM counselor" or call 800-569-4287) who can walk through your specific loan, your specific options as an heir, and the specific dollar math for your situation, in much more depth than we can. The counseling is free and there is no sales angle. If a reverse mortgage is in play, talking to a counselor before signing anything is a step worth taking.
Your real options as an heir
Four paths forward — the honest tradeoffs of each
The right path depends on how much time you have, how much equity exists above the loan balance, what the home's condition allows, and what the family wants. Below are the four paths that exist in practice. We close more sales than the other three combined, but that is not the same as saying a sale is always the right call. For some families, keeping the home or deeding it back is the better choice, and we will say so.
Keep the property
An heir pays off the reverse mortgage — using cash, a new conventional mortgage, or a combination — and takes title. The 95% rule applies here too: if the balance exceeds appraised value, the heir can satisfy by paying 95% of the appraisal. This path makes sense when the home has sentimental value, when an heir wants to use it personally, or when the family judges that holding the home is a better long-term financial move than selling. It requires the heir to qualify for and arrange financing inside the HECM window, which is the practical bottleneck.
Sell on the open market
List the home with a Realtor, market it on the MLS, accept the highest qualified offer, and close inside the 180-day window (or with extensions). This path nets the highest gross price when the home is in good condition, the family has time, and the local market is active. It does not work well when the home needs significant repairs, when the cleanout has not happened, or when the deadline is tight. Standard agent commissions, closing costs, and any buyer-requested repairs come out of the proceeds before they reach the estate.
Sell to a cash buyer
What we do. A direct cash buyer absorbs the home in its current condition, coordinates the reverse-mortgage payoff with the servicer (applying the 95% rule where it helps), pays any tax arrears and HOA dues at closing, and closes inside 14 to 30 days from contract. The price is lower than a fully-marketed retail sale would produce on a move-in-ready home — that is the honest tradeoff. The price is competitive (often higher) when the home needs work, the timeline is tight, the cleanout is significant, or the family wants to be done with the matter rather than manage a listing remotely.
Deed-in-lieu to the lender
Heirs sign the property back to the servicer through a deed-in-lieu of foreclosure. The servicer takes the home, the loan is satisfied, no equity comes to the estate, and the matter closes without a sale on either side. This path makes sense when the home is severely underwater, when the condition issues exceed what any buyer would absorb, or when the family genuinely wants to walk away. It produces no proceeds, but it is fast and final. Non-recourse protection still applies — heirs are not personally liable for any shortfall the deed-in-lieu does not cover.
What Diamond pays at closing
The practical math when we close on a reverse-mortgaged Texas home
When we close, the title company's settlement statement reflects every obligation tied to the property — the reverse-mortgage payoff, accrued taxes, insurance, HOA, closing costs, and any other recorded liens — all settled out of our purchase price. Whatever remains, if anything, is the estate's proceeds. Nothing is added or deducted later. What we agreed to in the contract is what funds.
The reverse-mortgage payoff (or 95% appraised, whichever is lower)
We coordinate directly with the HECM servicer to get the official payoff statement. When the loan balance exceeds the home's appraised value, we apply the 95% rule and pay the satisfaction amount the servicer confirms. The servicer marks the loan paid in full and releases the lien at closing. The heir or estate does not handle this coordination — it happens between our title company and the servicer.
Accrued property taxes, insurance, and HOA
If property taxes have lapsed during the borrower's long absence or after death, we pay the arrears at closing. Same for any forced-placed insurance the servicer added to the loan balance, any HOA dues that accumulated, and any code-enforcement liens. All recorded liens come off the property out of our purchase price. The estate does not write a check for any of it.
Closing costs and title work
Standard Texas closing costs — owner's policy, escrow fees, recording fees, title search — are on us. There is no buyer-side fee charged to the estate. The title company runs a full lien search; if anything unexpected surfaces (an old judgment, a mechanic's lien from a contractor years ago), we work with the title company to clear it before funding.
Net to estate, wired at closing
Whatever remains after the payoff, arrears, and closing costs are settled is wired to the estate account (or directly to heirs per the court order). For homes with meaningful equity above the loan balance, the net can be significant. For homes where the 95% rule was applied to an underwater balance, the net is typically zero — the sale closed cleanly, the loan is satisfied, and no proceeds flow to the estate. Both outcomes are acceptable; the family is not on the hook either way.
What we DON'T do
Three commitments specific to reverse-mortgage situations
Reverse mortgages sit at the intersection of finance, grief, and aging — three places where a buyer can do real damage if they want to. The commitments below are the lines we hold. They are not a marketing position; they are the operating rules for how we conduct ourselves in these specific calls.
We don't replace HECM counseling
HUD-approved HECM counseling is free and you should use it. We do not pretend our sales conversation is a substitute for the unbiased counseling HUD funds. If the counselor concludes that another path fits your family better than a sale to us, we agree with that conclusion and step aside. Search "HUD HECM counselor" or call 800-569-4287 to find an agency in your area.
We don't pressure surviving spouses
If a non-borrowing spouse may have eligible-spouse protections under HUD's 2014 rules, we will not push the sale forward until that determination is clear and the spouse (or their counsel) is comfortable. Surviving spouses with eligible status often have the right to remain in the home — we do not contract around that, do not lean on the family to override it, and do not bring "investor pressure" into a situation that is already hard enough.
We don't add fees at closing
The offer we sign is the offer that funds. There are no buyer-side fees added to the settlement statement at the last minute, no "convenience fees," no inspection-driven renegotiations after contract. If we surface something material during title work, we tell you in writing and you decide whether to continue — the offer does not quietly drift downward. What you signed is what funds.
Where this intersects with other situations
Reverse mortgages rarely show up alone
Almost every reverse-mortgage call we take has at least one other situation layered on top of it. The borrower has passed and the estate is in probate. The property has been vacant for a year and has condition issues. The taxes lapsed during the borrower's long absence. The pages below go deeper on each of those overlapping situations. You do not need to pick the "right" page to call us — the intake is the same, and we route the conversation based on what your specific situation actually involves.
Reverse mortgage + probate
The most common combination. The borrower passed, the home is in probate, and the reverse-mortgage clock is running. The Texas probate path (Independent Administration, Muniment of Title, Small Estate Affidavit, or Affidavit of Heirship) determines who has authority to sign and how the deed gets executed. Our inherited house Texas page walks through all four paths and how a cash sale fits each.
Reverse mortgage + tax delinquency
When a borrower's fixed income did not keep up with rising Texas property taxes, the tax bill is often the first thing to fall behind. Once taxes go delinquent long enough, the reverse-mortgage servicer can declare the loan in default — adding a second clock on top of the tax collector's clock. Our tax-delinquent Texas page walks through the stacked-deadline math and how we resolve both at closing.
Reverse mortgage + long vacancy
When a borrower moves to assisted living or passes, the home often sits empty for many months before anyone is positioned to act. Long Texas vacancies produce specific condition patterns — HVAC failures, plumbing issues, pest damage, foundation movement — that a traditional buyer is not equipped to absorb. Our vacant house Texas page goes deeper on what long vacancy does to a property and how the cash-buyer path handles it.
How it works
Our process when you call about a reverse-mortgage home
Four steps, adapted for the realities of a HECM payoff. The intake is different from a standard cash sale because the servicer drives part of the timeline — but the fundamentals are the same: one written offer, one closing, one team you talk to from the first call to the wire. We do not assign the contract to another buyer. We do not pass your information to a network.
- 1
Bring what the servicer has already sent
The first conversation goes faster when you have the basics in hand. Useful paperwork: the lender's due-and-payable notice, the most recent reverse-mortgage statement (showing the current balance), the death certificate if applicable, any heir or executor paperwork from the probate court, and whatever the servicer has told you so far about the timeline and the payoff amount. None of this is required to start the conversation — if you do not have any of it yet, we work from where you actually are.
- 2
Title pull, property assessment, servicer coordination
We open title to confirm chain of ownership, identify any liens beyond the reverse mortgage (tax arrears, HOA, mechanic's liens, judgments), and assess the property condition through a walkthrough — exterior, interior, mechanicals, roof, foundation. In parallel, we begin coordination with the HECM servicer: request the official payoff statement, confirm whether the 95% rule applies, and clarify the extension status if relevant. Most of this happens inside the first week.
- 3
Written offer with the payoff math shown
One offer, sent to whoever the family designates as the point of contact and copied to every heir or to the estate attorney. The offer shows our work: comparable retail sales for the area, our renovation budget at investor-retail labor rates, the reverse-mortgage payoff (with the 95% rule applied if relevant), tax and HOA arrears, cleanout costs if any, holding and closing costs, and the margin we need to underwrite the risk. The offer does not change after a later inspection — what you sign is what funds.
- 4
Close at title — servicer paid, remaining proceeds to estate
Once the contract is signed and the servicer confirms the payoff number, the title company opens escrow. Remote signing is standard — heirs in different states sign through the title company's e-signature platform or with a mobile notary. At closing, the servicer is paid in full (with the FHA insurance fund covering any gap under the 95% rule), tax arrears and other liens are paid, and the remaining proceeds are wired to the estate account or directly to each heir per the court order. Total time from signed contract to funded wires is typically two to four weeks, gated by the servicer's payoff statement.
Our broader process is documented on the main sell page, and answers to common seller questions live in the FAQ. The broader index of complex-situation pages is at /situations.
Reverse mortgage FAQ
The questions heirs ask first
How long do I have after the borrower dies?
The federal HECM rules give heirs a structured window, and it is more generous than most families realize. Within 30 days of receiving notice from the servicer, you respond with intent — keep the home, sell it, or deed it back to the lender. From the date the loan becomes due and payable, you have six months (180 days) to settle it. If you are actively marketing the property, the servicer can grant up to two 90-day extensions, for a total of about 360 days. The extensions are not automatic — you have to ask, document the listing or buyer activity, and stay in communication with the servicer. Most servicers will work with heirs who keep them in the loop; the heirs who get into trouble are the ones who stop responding to the mail.
What is the 95% rule and how do I use it?
Under HUD's HECM program, an heir who wants to keep the home or who is selling the home to a third party can satisfy the reverse mortgage by paying the lower of the full loan balance or 95% of the home's current appraised value. The appraisal is ordered by the servicer through a HUD-approved appraiser. The rule matters most when the loan balance has crept above the home's current value — common when the borrower lived a long time, took monthly draws, and the local market did not appreciate fast enough to keep pace. In those cases, the 95% number is meaningfully lower than the loan balance, and the FHA insurance fund (which the borrower paid into through MIP for years) covers the gap. We work with the servicer's appraisal to confirm the satisfaction number before we close. This is a HUD policy point, not something we negotiate — but it is genuinely one of the most underused parts of the HECM rulebook, and a HUD-approved HECM counselor (free) can walk you through it in more detail than we can.
Am I personally responsible if the loan exceeds the home value?
No. HECM is a non-recourse loan. The home is the only collateral. If the loan balance is higher than the home's value at the time it becomes due and payable, the FHA insurance fund covers the shortfall. The lender cannot pursue heirs personally, cannot reach other estate assets to make up the gap, and cannot put a deficiency judgment on anyone's credit. This is one of the consumer protections HUD built into the program when it was designed. The practical version: in an underwater scenario, you either pay 95% of appraised value to keep the home, sell it for whatever it brings (the servicer accepts the proceeds), or deed it back to the lender. Any of those three closes out your obligation cleanly.
What if the property has been vacant for months and is now in bad shape?
Common situation. When a borrower moves to assisted living or passes, the home often sits empty for a long stretch before anyone is in a position to address it. Vacancy plus a Texas summer plus deferred maintenance plus, sometimes, a roof leak nobody noticed produces a home that does not show well on the open market. We buy in that condition. Cleanout, repairs, and any servicer-required preservation work get factored into our offer math — you do not pay out of pocket. If the condition has crossed into something more serious (rodent damage, mold, broken plumbing), our /situations/vacant-house-texas page goes deeper on that scenario, but the intake is the same.
What about the surviving non-borrowing spouse?
Since 2014 HUD rule changes, a non-borrowing spouse may be eligible to remain in the home after the borrower's death without the loan being called due — provided they were married to the borrower at the time the loan was originated (or under updated rules, met certain other qualifying conditions), the home is their principal residence, and they continue to meet the property-charge requirements (taxes, insurance, HOA). HUD calls this "Eligible Non-Borrowing Spouse" status, and it is determined at the time the loan was made. An "Ineligible Non-Borrowing Spouse" — typically a spouse who married the borrower after origination — does not automatically have those protections. The distinction matters and is not something we can determine for you. If a surviving spouse is in the picture, that conversation belongs with a HUD-approved HECM counselor and likely an elder-law attorney before any decision to sell. We will not pressure a surviving spouse toward a sale they do not need to make.
Can you close before the 6-month deadline?
Yes, in most cases. From a clean signed contract, our typical close timeline is 14 to 30 days — well inside the 180-day HECM window. The variable is how quickly the servicer produces the payoff statement and confirms the satisfaction amount, particularly when the 95% rule applies and a fresh appraisal needs to be ordered. We have closed reverse-mortgage payoffs as fast as 21 days and as slow as 75 days; the spread is driven by the servicer, not by us. We start coordinating with the servicer the day you give us permission.
Do I need to go through probate first?
It depends on how title was held and which Texas probate path applies. If the deceased was the sole borrower and sole owner, an executor or administrator typically needs court authority before deeding the home — that means Independent Administration with letters testamentary, Muniment of Title, or one of the other Texas paths, depending on the estate. If the home was held in a living trust or with a transfer-on-death deed, the trustee or named beneficiary can often act without full probate. Our /situations/inherited-house-texas page walks through the three primary Texas probate paths in detail. We can sign a contract while you are still working through probate and coordinate the closing date with whenever the court grants the order. The sale and the probate run in parallel, not in sequence.
Is this page financial advice?
No. This page is general information to help heirs and fiduciaries orient themselves to what a reverse mortgage payoff actually involves in Texas. It is not financial advice, not legal advice, and not a substitute for the two professionals you should talk to: a HUD-approved HECM counselor (which is free — HUD funds the service) and a Texas probate or elder-law attorney. The HECM counselor can walk you through your options as an heir or borrower in much more depth than we can, with no sales angle. The attorney handles the estate-side mechanics. We are real estate buyers. Our role is to write a fair cash offer, coordinate with the servicer on the payoff math, and close — not to advise you on the federal rulebook or your family's estate plan.
Ready for a written cash offer?
Tell us about your property — we will come back with a fair, no-obligation offer in 24 hours.