When the borrower sells or conveys title of the property, passes away or does not maintain the property as a principal residence for a period exceeding 12 months due to physical or mental illness, you have reached what is called a “maturity event.”
Once the Loan Servicer has verified that a maturity event has occurred, it will mail a "Due and Payable" notice within 30 days to the surviving spouse or heirs informing them the loan must be repaid and providing options for doing so. The surviving spouse or heirs can sell the property, or the heirs can purchase the property for 95 percent of its current appraised value. If any equity is remaining after the sale of the home, it belongs to the heirs.
Future payments stop at death, but interest, mortgage insurance premium and homeowner’s insurance continue to accrue until the loan is settled.
You or your estate will work closely with the Servicer to ensure the loan is paid in full in a timely manner. While payment is due immediately, the estate has six months to satisfy the debt. If you are selling the property and it is still on the market after six month, you can request a 90-day extension, subject to approval by HUD. One additional 90-day extension can be requested, again with HUD's approval.
If the initial Due and Payable notice is not responded to, or the home hasn't sold after the 90-day extensions have expired, or if the borrower has no heirs to help pay off the loan, the Servicer may initiate foreclosure.
If, however, you or your estate are actively working to either refinance your property or sell your property so as to satisfy your reverse mortgage, then foreclosure may be forestalled. The key to a proper and clean end to a loan is to work closely with your Servicer from the time the loan is called due and payable.