When a reverse mortgage borrower dies or defaults, lenders don't foreclose. If the home is worth less than the loan, HUD absorbs the loss through FHA insurance, and heirs owe nothing. Heirs can keep the house if there's equity left or walk away free and clear.
Lenders are not in the business to foreclose on houses or be in the home selling business. If that house is less valued than the loan amount, no one's there to remedy that. HUD takes that, that home back. Then those losses are filed with the FHA insurance. Nothing that any heirs have to worry about as far as, you know, any type of financial responsibility. Ideally, we want to see a situation where there's equity left over. Most cases, that's the case, and the children just have to decide what they want to do, whether they want to keep the house or sell it.
