How to Avoid Foreclosure on a Reverse Mortgage Property in Maryland (Baltimore Guide)

Think you can't lose a home to foreclosure because it has a reverse mortgage? Think again.

One of the biggest misconceptions I encounter about reverse mortgages is that once a homeowner takes one out, they never have to worry about foreclosure again.

Unfortunately, that's not how it works.

While a reverse mortgage generally eliminates the requirement to make monthly principal-and-interest mortgage payments, it doesn't eliminate the homeowner's other responsibilities. And when those responsibilities aren't met, foreclosure can become a very real possibility.

I've worked with homeowners and families throughout the Baltimore area dealing with complicated property situations, including reverse mortgages, estate sales, short sales, and foreclosure.

One thing I've learned over the years is that many people don't realize they have a problem until they've already received a notice from the mortgage company.

The good news? Depending on the circumstances, there may still be options.

Why Would a Reverse Mortgage Go Into Foreclosure?

Most reverse mortgages are federally insured Home Equity Conversion Mortgages (HECMs).

Unlike a traditional mortgage, a HECM generally doesn't require monthly principal-and-interest payments while the borrower meets the loan's requirements.

However, there are several situations that can trigger a default or make the loan due and payable.

1. Unpaid Property Taxes or Homeowners Insurance

This is one of the biggest issues homeowners need to understand.

Even with a reverse mortgage, you're generally responsible for paying property taxes, maintaining homeowners insurance, and covering other required property charges.

If those obligations aren't met, the mortgage servicer may advance money to cover them. That doesn't mean the problem disappears.

2. The Property Is No Longer the Primary Residence

Reverse mortgages generally require the borrower to occupy the property as their principal residence.

For example, if a homeowner moves permanently into assisted living or a nursing home, the loan may eventually become due.

For a HECM, an absence of more than 12 consecutive months in a healthcare facility can trigger repayment requirements, subject to applicable co-borrower and eligible-spouse protections.

3. The Homeowner Passes Away

When the last surviving borrower dies, and no eligible spouse protection applies, the reverse mortgage generally becomes due and payable.

This can create an unexpected situation for children or family members who inherit the property.

4. The Property Isn't Properly Maintained

A reverse mortgage also requires the homeowner to maintain the property.

Significant unresolved maintenance problems can create additional complications with the lender.

The bottom line is simple: A reverse mortgage eliminates certain monthly payments. It doesn't eliminate the possibility of foreclosure.

What Should You Do If You Receive a Reverse Mortgage Foreclosure Notice?

First, don't ignore it.

I can't emphasize that enough.

Whether you're the homeowner, an adult child helping an elderly parent, or the personal representative handling an estate, the worst thing you can do is put the notice aside and assume there's nothing you can do.

Start by contacting the mortgage servicer and finding out exactly why the loan is in default or has become due.

Ask these questions:

  • What specifically triggered the default?

  • What amount, if any, is needed to correct the problem?

  • What is the current loan balance?

  • Has the loan been declared due and payable?

  • Has foreclosure actually been initiated?

  • What options and deadlines apply to this particular loan?

Get the answers in writing whenever possible.

If the issue involves unpaid taxes, insurance, or required repairs, there may be opportunities to correct the default or request assistance.

If the loan is due because the borrower passed away or permanently moved out, the solution may involve paying off the loan, refinancing, or selling the property.

The important thing is understanding which problem you're actually trying to solve.

Can You Sell a House With a Reverse Mortgage Before Foreclosure?

Yes. And in some situations, selling the property may be the most practical solution.

This is especially true when the homeowner has permanently moved out, the family has inherited the property, or maintaining the home is no longer financially realistic.

A reverse mortgage doesn't mean the bank owns the house.

The homeowner still holds title, and the property can generally be sold, subject to the loan payoff and any other applicable requirements.

Let's look at an example.

Suppose a Baltimore County homeowner has a reverse mortgage balance of $225,000.

The property is worth approximately $350,000.

If the homeowner decides to sell, the reverse mortgage would generally be paid off at settlement, along with applicable selling expenses.

Any remaining proceeds would belong to the homeowner or, in an estate situation, be handled through the estate.

That's a substantially different outcome than simply allowing a property with available equity to proceed through foreclosure.

Of course, every situation is different, and the actual payoff, property value, and selling expenses need to be verified.

What If the Reverse Mortgage Balance Is More Than the House Is Worth?

Here's another area where families often become unnecessarily discouraged.

Imagine someone inherits a property in Baltimore with a reverse mortgage balance of $325,000.

Unfortunately, the home is only worth approximately $275,000.

The family may assume they're stuck with a property they can't sell because the mortgage exceeds its value.

That isn't necessarily true.

For an FHA-insured HECM that has become due and payable, there are provisions that can allow an eligible sale for at least 95% of the property's current appraised value when the loan balance exceeds the home's value.

The applicable appraisal, lender requirements, and approval process matter.

This is not a blanket rule that every reverse mortgage can be sold for any amount a buyer offers.

But it does mean that a property being underwater doesn't automatically eliminate the possibility of a sale.

Families should also understand that federally insured HECMs have protections that generally prevent borrowers or their estates from being personally responsible for a shortfall beyond the home's value.

Proprietary reverse mortgages may have different terms.

What Happens When Someone Inherits a House With a Reverse Mortgage?

This is particularly important for families handling probate and estate properties.

When a parent or other loved one passes away, family members are often dealing with funeral arrangements, estate paperwork, personal belongings, and dozens of other responsibilities.

The house may not be their first priority.

Unfortunately, the reverse mortgage servicer may already be moving through its own process.

For a HECM, heirs may receive a notice that the loan is due and payable. The notice can establish an initial 30-day response period, although additional time may be available under applicable rules.

Extensions may be possible when heirs are actively working to sell the property or arrange repayment, but they aren't something families should assume will happen automatically.

The personal representative or appropriate authorized party should communicate with the servicer promptly, provide requested documentation, and understand the deadlines.

If the property is going to be sold, starting the process early can make a significant difference.

For more information, see my related article:

What Happens to a House With a Reverse Mortgage After Death? (Baltimore Guide)

Five Steps That May Help Prevent Reverse Mortgage Foreclosure

If you're dealing with a reverse mortgage that's in default or approaching foreclosure, here's where I would start.

1. Contact the mortgage servicer immediately.

Find out why the loan is in default, request a current payoff statement, and confirm any deadlines.

2. Determine whether the default can be corrected.

If unpaid property taxes or insurance are the issue, ask about repayment options, available assistance, and whether the servicer offers an applicable loss-mitigation solution.

3. Get an accurate assessment of the property's value.

You need to understand whether there's equity in the home and whether selling could satisfy the reverse mortgage.

4. Speak with a HUD-approved housing counselor or qualified attorney.

Especially when foreclosure proceedings have begun, getting advice about your legal rights and available assistance is important.

5. Develop a realistic plan instead of waiting.

Whether the goal is keeping the property, selling it, or resolving an estate, deadlines matter.

Maryland homeowners can contact the Maryland Homeowner Assistance Hotline at 1-877-462-7555 for referrals to foreclosure-prevention counseling and legal resources.

The Bottom Line: Don't Let a Reverse Mortgage Become an Avoidable Foreclosure

Reverse mortgages can provide important financial flexibility for older homeowners.

But when circumstances change—whether because of unpaid expenses, declining health, a move into assisted living, or the death of a loved one—the loan can become complicated very quickly.

I've seen throughout my real estate career how difficult these situations can become when families wait too long to address them.

Sometimes the best solution is finding a way to keep the property.

Other times, selling the house before foreclosure may preserve equity, reduce expenses, and allow the homeowner or family to move forward.

The important thing is understanding your options before someone else makes the decision for you.

If you're dealing with a reverse mortgage property in Baltimore City, Baltimore County, Harford County, Anne Arundel County, Howard County, or the surrounding Maryland area, I'm happy to help you understand the real estate side of the situation.

No pressure. Just an opportunity to review the property, discuss its value, and determine whether selling makes sense.

About Dan McDevitt

Dan McDevitt is a Baltimore-area Realtor with Cummings & Company Realtors and President of RealVolution Homes Group. With more than 20 years of real estate experience, Dan specializes in helping homeowners and families navigate complex real estate situations brought on by major life events, including probate, estate and inherited property sales, divorce, foreclosure, short sales, reverse mortgages, and other distressed property situations throughout Baltimore and the surrounding Maryland counties.

Dan McDevitt
Cummings & Company Realtors
RealVolution Homes Group
410-670-4762
www.RealVolutionHomes.com