The letter usually arrives before anyone has finished the funeral.
When a parent with a reverse mortgage dies, the family's first real contact with the loan is often a "due and payable" notice from the servicer — a formal-looking envelope addressed to an estate that does not exist yet, demanding action from people who have no legal authority to act. It is not a scam. It is not a mistake. It is the start of a clock.
Here is the part that catches Hamilton County families: the deadline the servicer is working from is federal and short, and the process that gives you the legal power to sell the house — Tennessee probate, through the Chancery Court — is neither. Houses get lost in that gap. Not because there was no equity, but because nobody realized the two calendars did not line up until one of them had already run out.
This guide walks through what a reverse mortgage actually does when the borrower dies, the deadlines that apply, the rule that keeps you from ever owing more than the house is worth, and the four real options in front of you.
Reverse mortgages are governed by federal rules; the estate is governed by Tennessee law; the deadlines are set by your specific servicer. Use this to know which questions to ask, then confirm your own situation with a Tennessee probate attorney, the loan servicer in writing, and a HUD-approved housing counseling agency before you sign anything.
What Actually Happens to a Reverse Mortgage at Death
Nearly every reverse mortgage in Tennessee is a Home Equity Conversion Mortgage (HECM) — the FHA-insured product that HUD regulates. During the borrower's life it works backwards from a normal loan: no monthly payments are required, the balance grows instead of shrinking, and the borrower keeps title as long as they live in the home and keep the property charges current.
When the last surviving borrower dies, that arrangement ends. The loan becomes due and payable. Nothing about it converts into a monthly payment plan, and there is no version where it simply keeps sitting there while the family decides.
Three things follow from that, and they matter in this order:
- The debt does not disappear. The house is the collateral, and the servicer is entitled to be paid from it.
- You do not inherit the debt personally. A HECM is a non-recourse loan — recovery is limited to the property, and FHA mortgage insurance absorbs any shortfall. Being named in a will does not make you a borrower.
- What you inherit is a deadline. That is the whole problem, and it is the part families consistently underestimate.
It is worth knowing that death is not the only trigger. A HECM also becomes due if the borrower permanently moves out, is away from the home for more than twelve consecutive months for medical reasons, or falls behind on property taxes, homeowner's insurance or association dues. If a parent went into assisted living in Ooltewah or Cleveland and the house has been empty since, the loan may already have been called due before the death certificate was issued — check the file rather than assuming the clock just started.
The Two Clocks: 30 Days, Then Six Months
Once the servicer learns of the death, it sends the due-and-payable notice. From there, the timeline the Consumer Financial Protection Bureau describes is short and specific.
Heirs have 30 days from that notice to buy the home, sell it, or turn it over to the lender. The CFPB adds that it may be possible for the timeline to be extended up to six months so heirs can sell the home or obtain their own loan to purchase it.
Read those two sentences carefully, because the practical meaning is not obvious:
- The 30 days is for responding, not for closing. Nobody expects a house to sell in a month. What the servicer expects inside 30 days is contact — a stated intention and evidence you are moving.
- The six months is not automatic. It is granted, not owed. Servicers request additional time from HUD, and approvals generally track documented progress: a signed listing agreement, an executed purchase contract, a loan application actually in underwriting.
- Silence is the one fatal move. An estate that does not respond is an estate the servicer refers to foreclosure. Extensions do not get handed to heirs who have gone quiet.
Call the number on the notice, say who you are, say the borrower has died, and ask three things in writing: the current payoff figure, the exact deadline they are tracking, and what documentation they need from the estate. Put the deadline on a calendar. Everything else in this guide is easier once you know the real date instead of guessing at it.
Where This Goes Wrong in Hamilton County
Now put the servicer's six-month horizon next to Tennessee probate.
Under Tennessee law, real estate technically vests in the heirs — or in the devisees named in a will — at the moment of death. But the property stays subject to the administration of the estate, which means it can be reached by creditors and is generally not transferable with clean title until a personal representative has authority. In practice, a title company will want to see Letters Testamentary or Letters of Administration issued by the Hamilton County Chancery Court, where the Clerk & Master administers probate filings for Chattanooga estates.
Getting there takes time. The petition is filed, a brief hearing follows — often within 30 to 60 days — and the Letters issue. Notice to creditors is published. Tennessee requires the estate to remain open for at least four months after the personal representative is appointed, and a straightforward Hamilton County estate realistically runs six to twelve months start to finish. A contested will, disagreeing heirs or an insolvent estate pushes that to twelve to twenty-four. Our step-by-step guide to selling an inherited house in Chattanooga walks the whole probate sequence in detail.
So the arithmetic is uncomfortable: a six-month lender deadline against a six-to-twelve-month court process, with the lender's clock starting first.
The way out is a distinction most families miss. You do not need probate to be finished in order to sell. You need authority. Once Letters are issued, a personal representative holding a power of sale under the will can typically sell the property without a separate court order; if the will grants no such power, the representative petitions the court for permission to sell, and Hamilton County Chancery Court routinely approves those petitions when the sale is at fair market value and every heir has notice.
Which means the single highest-value thing you can do in month one is open the estate. Not decide about the house. Not clean it out. File.
We have seen the other version of this more times than we would like. A house on the Georgia line in Rossville sat empty for years — heat off, yard grown up, belongings still in place — not because nobody wanted to deal with it, but because the estate was never sorted and there was no legal way for anyone to sell. We ended up paying for the title work ourselves to get that family to a closing table; the full story is on our Rossville probate project page. Every year a house waits, it gets worse and the problem gets heavier.
Reverse Mortgage Deadline Closing In?
We buy inherited and probate properties across Hamilton County and North Georgia — as-is, no lender, no repairs — and we can work directly with the estate's attorney on timing. Get a no-obligation number and see whether the math works.
The 95% Rule — and Why the Appraisal Runs Everything
The most common fear families bring to this is that the loan has grown past the value of the house and the family is on the hook. It is worth answering directly.
When the balance exceeds what the home is worth, heirs do not make up the difference. The CFPB puts it plainly: heirs will not have to pay more than 95 percent of the appraised value, with the remaining balance covered by mortgage insurance. To keep the home, heirs pay the full balance; to sell it, they repay the balance or at least 95 percent of the appraised value where the balance is higher than the home is worth.
That protection has a mirror image that sellers rarely anticipate. Because HUD sets a minimum amount that satisfies the debt, the sale also has a floor. An underwater HECM property cannot simply be dumped at whatever price the family will take — a sale below the required minimum needs the servicer's and HUD's blessing, and that approval process is itself a consumer of the six months you do not have.
Everything therefore hinges on one number: the appraised value the servicer is working from. Ask for it in writing. Ask when it was performed. If it looks wrong — and on a house nobody has maintained, or one the appraiser could not fully access, it sometimes is — ask what the process is to have the value reconsidered. That question is free and it moves more money than anything else you will do in this process.
Whether There Is Equity Here at All
Many of the reverse mortgages coming due in Chattanooga right now were written against values from a very different market, which changes the conversation from "how bad is this" to "how much is ours."
Hamilton County reappraises property on a four-year cycle, and the 2025 reappraisal — the first since 2021 — was historically large. The Assessor of Property reported residential values up roughly 59% countywide across that cycle. Because Tennessee requires the tax rate to be rolled back so a reappraisal is not a revenue windfall, the county's certified rate fell to about $1.51 per $100 of assessed value from $2.23 — reported at the time as the lowest county rate since 1941.
The useful takeaway is not the tax rate. It is that a house borrowed against in, say, 2018 may now be worth substantially more than the loan that has been quietly compounding on it. Families who assume the reverse mortgage has eaten the whole house are frequently wrong.
Assessed value, market value and the servicer's appraised value are three different numbers, and only the last one drives your payoff. Use the reappraisal as a signal that there may be real equity here — then get an actual value opinion and an actual written payoff before you make a decision worth six figures.
For what the current market is doing in this county, our 2026 Chattanooga market guide has the conditions, and our cash buyer vs. realtor comparison has the math for running a listing against a cash sale on the same property.
The Bills That Do Not Pause for Probate
While the estate works through court, the house keeps costing money — and two of those costs can create new defaults on top of the one you are already handling.
Property taxes. A HECM requires taxes and insurance to stay current, and a tax delinquency is its own due-and-payable trigger. In Hamilton County, taxes are payable from October 1 through the last day of February and become delinquent March 1, when they begin accruing 1½% per month in interest. The City of Chattanooga bills separately from the county, so a house inside the city limits has two tax obligations, not one. If the bills have gone unpaid for a while, our Hamilton County tax sale timeline lays out exactly where in the process the property sits and what it takes to clear it.
Insurance. This is the quiet one. Most homeowner's policies restrict or void coverage once a dwelling has been unoccupied beyond a stated period — typically 30 to 60 days depending on the form. An estate that keeps paying a premium on a policy that no longer covers a vacant house is buying nothing at all. Call the carrier, tell them the truth about occupancy, and ask specifically for vacant-dwelling coverage in writing. What vacancy does to both condition and insurability is covered on our page about selling a vacant house in Chattanooga.
Add utilities kept on for winterizing, yard maintenance the neighbors will call about, and the slow deterioration of a house with nobody in it, and the carrying cost of "we will decide later" is higher than most families estimate.
Your Four Real Options
To keep the property you pay the loan in full — or, where the balance exceeds the value, the lesser amount described above. Most heirs do this by refinancing into a traditional mortgage in their own name, which means qualifying on their own income and credit while the servicer's clock runs. Start the application the same week you get the notice; underwriting is not fast, and the extension is easier to get when there is a real loan file to point at.
The tradeoff: You are taking on a full mortgage payment on a house that until now had none, and any other heirs generally need to be bought out of their share.
If there is meaningful equity and the property presents well, a traditional listing will usually net the estate the most money — and when that is true, that is what you should do. The loan gets paid at closing out of the proceeds and the balance goes to the estate, exactly the way a normal mortgage payoff works.
The tradeoff: Time. Marketing, a financed buyer's underwriting, an appraisal and an inspection all have to fit inside a deadline that was not built for them — and inherited houses tend to be the ones that draw repair demands.
There is no lender, so there is no appraisal contingency, no underwriting and no repair negotiation — and the parts of a sale that normally take the longest are the parts that disappear. We buy in this exact situation across Hamilton County and into Walker and Catoosa counties in Georgia, we pay closing costs out of the proceeds, and we will coordinate directly with the estate's attorney. Our as-is selling guide covers what that condition discount really looks like here.
The tradeoff: A cash offer is below retail. That discount is what buys the certainty, and it is only the right trade when certainty is what the estate actually needs.
A deed in lieu of foreclosure hands the property to the lender and ends the matter. Because the loan is non-recourse, the estate is not chased for the difference. Done deliberately, this is a legitimate outcome, not a failure.
The tradeoff: You give up any equity that existed — so establish the value before you sign, not after. Some families deed back houses that were worth more than the loan.
If a Surviving Spouse Still Lives in the House
Before assuming the loan is due at all, check who was actually on it.
If the surviving spouse is a co-borrower, the loan is not due. It continues on the same terms as long as they live in the home as their principal residence and keep the property charges current. Nothing in this guide applies yet.
If the surviving spouse was a non-borrowing spouse — a common arrangement where one spouse was too young to qualify, or was left off to increase the loan amount — the answer depends on how the loan was written. HUD's rules allow a deferral of the due-and-payable status for a spouse who was identified as an eligible non-borrowing spouse at closing and who continues to meet the conditions, including occupying the home as a principal residence and keeping taxes and insurance current. Those protections are not automatic and they are not retroactive; they are established in the loan file and then certified on an ongoing basis.
This is a documents question with a very large answer attached to it. Pull the loan file, look for the non-borrowing spouse certification, and get the servicer's position in writing before anyone starts packing.
What to Do in the First Two Weeks
If you take nothing else from this page, take this sequence. It is ordered by what unlocks the next thing.
- Find the loan. The deed of trust securing a reverse mortgage is recorded with the Hamilton County Register of Deeds, so even if the paperwork is lost you can confirm the lender exists and who holds it.
- Order certified death certificates. Several. Everyone in this process will want one.
- Call the servicer. Report the death, then request the written payoff, the tracked deadline, and their documentation list.
- Call a Tennessee probate attorney this week. Opening the estate is the bottleneck that gates every other option. It does not have to be finished — it has to be started.
- Fix the insurance. Confirm occupancy status with the carrier and get vacant-dwelling coverage in writing if the house is empty.
- Check both tax bills. The Hamilton County Trustee for county taxes, and the city for a property inside Chattanooga.
- Get a real read on value. Compare it against the written payoff. That single comparison determines which of the four options is even on the table.
- Decide, and tell the servicer what you decided. A documented plan is what extensions are granted against.
The honest counterweight we give on every one of these pages applies here too: if there is real equity, the house shows well, and the estate has authority in hand with months to spare, list it on the open market and take the higher number. That is the right answer more often than people expect, and we will tell you so.
What is not a strategy is waiting to see what the servicer does. They foreclose — and in Tennessee that is fast. This is a non-judicial foreclosure state: no lawsuit, no judge, and once the notice of sale is published, Tenn. Code § 35-5-101 requires only 20 days before the auction can happen, with the notice of the right to foreclose sent at least 60 days before that first publication under § 35-5-117. Our Tennessee foreclosure timeline lays out every stage. An estate that assumed it had a year can find the sale date three weeks out.
More questions are answered on our FAQ page, how it works walks through our process end to end, and our inherited house page covers what we handle on probate purchases specifically.
Frequently Asked Questions
My mother had a reverse mortgage and passed away. Do I owe the balance?
Not personally. A Home Equity Conversion Mortgage is a non-recourse loan, which means the lender's recovery is limited to the property itself and FHA mortgage insurance covers any shortfall. You did not co-sign anything by being named in a will, and no one can pursue you for a deficiency. What you inherit is not the debt — it is a deadline and a decision. The loan becomes due and payable when the last surviving borrower dies, and the house is the collateral behind it. If you want to keep the house you have to pay the loan off. If you want the equity, you have to sell within the servicer's timeline. If you want neither, you can hand the property back. Doing nothing is the only choice that has no upside.
How long do I have to sell a house with a reverse mortgage after the owner dies?
Less time than the estate takes. According to the Consumer Financial Protection Bureau, once heirs receive a due-and-payable notice from the lender they have 30 days to buy the home, sell it, or turn it over to the lender, and it may be possible for that timeline to be extended up to six months so heirs can sell or obtain their own financing. Additional time beyond that is discretionary, has to be requested by the servicer from HUD, and generally depends on showing documented progress — a signed listing agreement, an executed contract, a loan application in underwriting. Treat six months as your planning horizon and anything past it as a bonus you did not count on.
What if the reverse mortgage is worth more than the house?
That is the situation the FHA insurance exists for. When the loan balance exceeds the value of the home, heirs are not asked to make up the difference — the CFPB explains that heirs will not have to pay more than 95 percent of the appraised value, with the remaining balance covered by mortgage insurance. In practice that means the payoff has a ceiling, and it also means the sale has a floor: HUD sets a minimum acceptable amount for a sale that satisfies the debt, which is why a deeply discounted sale is not automatically approved. The appraisal that drives that number matters enormously, so ask the servicer in writing what appraisal they are working from and what the required minimum sale price is before you price the house.
Can I sell the house before probate is finished in Hamilton County?
Usually yes — you need authority, not a closed estate. Under Tennessee law real property vests in the heirs or devisees at the moment of death, but it stays subject to the administration of the estate, so a buyer's title company will want to see that the personal representative has been appointed. Once the Hamilton County Chancery Court issues Letters Testamentary or Letters of Administration, a personal representative holding a power of sale under the will can generally sell without a separate court order; without that power, the representative petitions the court for permission to sell. What you cannot do is wait for the estate to close. A straightforward Hamilton County estate runs six to twelve months, and Tennessee requires the estate to stay open at least four months after appointment, so the servicer's clock will expire first if nobody starts.
Can a cash buyer close fast enough to beat a reverse mortgage deadline?
Often, yes — provided the estate has authority to convey. The delay in these sales is almost never the buyer; it is the probate filing nobody made and the title work nobody started. A cash purchase removes the parts that take longest on a financed deal: no lender, no appraisal contingency, no underwriting, no repair demands on a house that has been sitting. We buy inherited and probate properties across Hamilton County and into North Georgia, we can coordinate with the estate's attorney on timing, and we have paid for title cleanup ourselves when that was what was blocking a closing. Call us at (423) 212-8384 and we will tell you honestly whether the timeline works.
