As an heir of a borrower, you may be eligible to pay off the reverse mortgage at the full loan balance or 95% of the FHA appraised value, whichever is less. This option is very similar to HUD’s Short Sale program, but it allows the property to remain within the family. If the loan is eligible for a short sale/heir payoff there are additional costs that HUD may pay associated with the closing costs.
I frequently work with estates, heirs, and executors who wish to retain the property. As part of this process, I review Probate documents, Trusts, and Wills, and collaborate with Probate Attorneys and Title Companies to ensure title can be properly conveyed and any liens are cleared prior to closing.
Step 1: Letter of Intent
To begin the Heir Payoff process, I’ll help you submit a Letter of Intent to HUD. This letter must come from an authorized party (such as an heir, executor, or homeowner) and simply states that you intend to retain or sell the property within the family.
If the home’s estimated value is lower than the reverse mortgage balance, the letter should also include a request for an appraisal.
Step 2: Appraisal
HUD can order the appraisal and charge the cost to the HECM loan. If you prefer to obtain your own appraisal, I can assist with that as well, or you may hire an FHA-approved appraiser. You can search for one in your area using HUD’s online directory: https://entp.hud.gov/idapp/html/apprlook.cfm
Step 3: Proof of Funds
You’ll need to provide proof of funds, showing either: A mortgage approval or Documentation of your ability to pay off the loan balance or heir payoff amount.
Step 4: HUD Approval
Once the required documents are complete, I’ll prepare and submit the Heir Payoff packet to HUD for review. When approved, HUD will send confirmation via email from answers@hud.gov