The House That Wasn't Theirs

The Loan Nobody Mentioned

Margaret Okonkwo had lived in her Frisco home for twenty-eight years. She raised her two children there — James, now a project manager in McKinney, and Patricia, a teacher in Plano — and after her husband Emeka died in 2017, she stayed. The house was paid off, the property taxes were rising, and her Social Security check covered less each year. In 2019, at 79, she had done something she told almost no one: she took out a reverse mortgage.

The money let her stay. It covered the HVAC replacement, the property taxes that had climbed above $7,000 per year, the groceries, the occasional prescription that insurance didn't fully cover. It funded, quietly, the final years of her independence. When she died in February 2026, she had used the home's equity as she had the right to do.

James and Patricia found out from a phone call — not from their mother's will, not from the executor, not from the attorney who had drafted the estate documents. A reverse mortgage servicing company they had never heard of called to notify them that the outstanding loan balance had reached $247,000 and that they had six months to resolve it before foreclosure proceedings could begin.

That call is not unusual. Estate planning attorneys in McKinney, Frisco, Plano, and across the Dallas-Fort Worth metroplex hear versions of it regularly: adult children who knew nothing about a parent's reverse mortgage until the parent was gone and the clock had already started.

What Most Texas Families Don't Know About Reverse Mortgages

A reverse mortgage is a loan against the equity in a home, available to homeowners 62 and older. Instead of making monthly payments to a lender, the homeowner receives payments — or draws from a line of credit — with interest accumulating on the growing balance. The loan becomes due and payable when the borrower permanently leaves the home, sells it, stops paying taxes and insurance, or dies.

The dominant product is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). Texas was actually one of the last states in the country to allow reverse mortgages at all. Texas homestead protections — among the most powerful in the nation — effectively barred them until 1997, when Texas voters approved a constitutional amendment specifically authorizing reverse mortgages under Article XVI, Section 50(k) of the Texas Constitution.

Since that amendment, Texas has grown into one of the largest HECM markets in the country. The combination of a large and rapidly aging senior population, high home equity values in the suburban DFW corridor — McKinney, Frisco, Allen, Plano, Southlake — and the reality of fixed incomes outpaced by rising costs has made reverse mortgages an increasingly common financial tool for Texas seniors.

It has also made reverse mortgages an increasingly common estate planning complication for their heirs.

The Federal Clock That Doesn't Wait for Texas Probate

When a HECM borrower dies, federal guidelines activate a specific repayment timeline. Under HUD's servicing requirements (Mortgagee Letter 2015-15 and subsequent updates), heirs face a structured series of deadlines:

• Within 30 days of death: Heirs must notify the servicer of the borrower's death and communicate their intent — whether they plan to sell, refinance, or pursue another resolution.
• Within 6 months of the loan becoming due and payable: Heirs must complete the chosen resolution — sale, refinance, payoff with estate funds, or deed in lieu of foreclosure.
• Extension: up to two additional 90-day periods (total of up to 12 months) are available if heirs can document good-faith efforts to sell or refinance the property.

The critical point: this federal clock does not pause for Texas probate. Opening an estate, qualifying an executor with the county court, gathering assets, and working through the process of determining what to do with the home all take time — and they eat into the same months that HUD's timeline is counting down.

An executor who does not know about the reverse mortgage, or who knows but does not understand the HUD notification requirement, can inadvertently lose weeks from the window before anyone has even begun to evaluate the options.

What Texas Heirs Can Actually Do

Heirs inheriting a Texas home with an outstanding HECM balance have four realistic paths:

Sell the home. If the sale price exceeds the loan balance (including accrued interest, mortgage insurance premiums, and fees), heirs receive the net proceeds. This is the most common resolution. A home appraised at $318,000 with a $247,000 loan balance leaves approximately $71,000 for the estate after closing costs — far less than heirs expecting to inherit free and clear equity, but a resolution that avoids foreclosure and preserves something.

Refinance into a conventional mortgage. An heir who wants to keep the home can qualify for a conventional mortgage to pay off the HECM balance. This is viable if the heir has income and creditworthiness sufficient to qualify, and if the home's value justifies the financing. Many heirs attempt this and discover that qualifying for a mortgage under time pressure — while also managing an estate — is harder than expected.

Pay off the balance with estate funds. If the estate includes sufficient liquid assets — life insurance proceeds, savings, investment accounts — the executor can direct estate funds to pay off the reverse mortgage and the heir keeps the home clear of the lien. This requires advance planning; it only works if the estate has assets sufficient to cover the balance.

Deed in lieu or the 95% rule. This is the option that most families never learn about. If the outstanding loan balance exceeds the home's current fair market value — meaning the home is "underwater" — heirs are not personally liable for the difference. HECM is a non-recourse loan. Heirs can satisfy the debt by paying just 95% of the current appraised fair market value, not the full inflated loan balance. If even that is not feasible, heirs can convey the home to the lender by deed in lieu of foreclosure and walk away with no personal liability whatsoever. The lender absorbs the loss, with FHA mortgage insurance covering the remainder.

The non-recourse protection is a genuine and significant benefit of the HECM program. But it only helps families who know about it before they make decisions under false assumptions of personal liability.

The Texas Homestead Exception Most People Miss

Texas homestead protections are legendary for good reason. The Texas Constitution and the Texas Property Code shield a homestead from forced sale to satisfy most creditors — a protection that has made Texas a haven for debtors from Andrew Jackson to modern bankruptcy filers. Many Texas homeowners believe, understandably, that the homestead exemption protects their family home from virtually everyone.

It does not protect a home from a reverse mortgage lender.

The same constitutional amendment that authorized reverse mortgages in 1997 — Article XVI, Section 50(k) — expressly carved HECMs out of the homestead's creditor protection. Reverse mortgages, along with purchase money mortgages, home equity loans, and refinances, are among the specific categories of liens that can be enforced against a Texas homestead. A HECM lender who holds a valid lien on a Texas homestead can foreclose, legally and procedurally, if heirs fail to resolve the debt within the HUD timeline.

This comes as a surprise to many Texas executors and beneficiaries. The homestead exemption — so powerful in bankruptcy, so protective against general creditors — does not save a home from the reverse mortgage balance that accumulated while the owner was alive.

The Estate Planning Angle: What Seniors Should Do Before the Loan Is Due

The reverse mortgage is not the problem. Seniors have the right to use their home equity to fund their lives, pay for care, and maintain independence — and many do so wisely and deliberately. The problem is planning that fails to account for the reverse mortgage when the time comes to pass assets to heirs.

If you are a Texas senior with a HECM — or if you are considering one — here is what responsible estate planning requires:

Tell your adult children. This is the single most valuable action a reverse mortgage borrower can take. Heirs who know about the loan before the borrower dies can prepare for the repayment timeline, explore their options in advance, and avoid the panic of a servicer call they were not expecting.

Name an executor who knows the timeline. The executor's obligations around a HECM begin within 30 days of death. An executor who is unaware of the reverse mortgage — or who misunderstands that HUD's timeline does not stop for probate proceedings — can inadvertently erode the repayment window before the family has even had a chance to evaluate their options.

Document the loan in your estate records. Loan statements, servicer contact information, and the current outstanding balance should be included with estate documents, in the same place as the will, deed, and powers of attorney. The executor needs this information immediately upon death — not weeks later when the servicer's first letter arrives.

Consider life insurance to fund the payoff. Some seniors who have taken reverse mortgages and want to preserve the family home purchase term or whole life insurance naming heirs as beneficiaries with proceeds sufficient to retire the HECM balance. This is a deliberate, pre-planned strategy that allows heirs to pay off the loan and keep the property. It requires advance planning when the insurance is still attainable.

Evaluate Lady Bird Deeds with care. Lady Bird Deeds — enhanced life estate deeds used widely in Texas to transfer homes outside probate — do not eliminate a reverse mortgage lien. A beneficiary who takes title to a home through a Lady Bird Deed takes it subject to the outstanding HECM balance and must resolve the debt within the HUD timeline. Some HECM servicers also have specific requirements regarding Lady Bird Deeds on reverse-mortgaged properties. Before executing a Lady Bird Deed on a home that carries a reverse mortgage, a real estate and estate planning attorney should review the loan documents carefully.

Reverse Mortgages and Medicaid: A Quiet Collision

For many North Texas seniors, a reverse mortgage functions as a bridge to in-home care — a way to stay out of a nursing facility while funds hold out. The connection between reverse mortgages and Medicaid planning is therefore not theoretical. It is practical and immediate.

Reverse mortgage loan advances are generally excluded from countable income under Texas Medicaid eligibility rules. Money drawn from a HECM line of credit is treated as a loan advance, not income, and does not count against the income threshold. This makes reverse mortgages appear compatible with Medicaid eligibility — and in the short term, they often are.

The complication arrives with Texas Medicaid estate recovery. Under federal law, states must attempt to recover Medicaid costs from the estates of recipients who were 55 or older when they received benefits. Texas participates in estate recovery through the Texas Medicaid Estate Recovery Program (MERP). If a senior uses a reverse mortgage to fund in-home care, eventually qualifies for Medicaid nursing facility benefits, and then dies, the estate may face both a HECM payoff obligation and a MERP claim — two competing creditors reducing whatever equity remains for heirs.

Coordinating these two systems — deciding which to address first, how to structure remaining assets, and what the realistic inheritance scenario looks like — is the kind of integrated analysis that requires an attorney who works across elder law, Medicaid planning, and estate administration. The reverse mortgage alone is manageable. The reverse mortgage plus Medicaid plus estate recovery, without prior planning, can leave heirs with very little from what looked like substantial home equity.

Back in Frisco

James and Patricia Okonkwo retained an elder law attorney two weeks after receiving the servicer's call. The attorney reviewed the HECM documents, confirmed the current balance and the home's appraised value, and walked them through their four options.

The home was worth $318,000. The outstanding balance was $247,000. Selling was the clear choice. They listed the property, received an offer within three weeks, and closed before the six-month HUD deadline. After paying off the reverse mortgage and closing costs, the estate netted approximately $58,000 — split between them, about $29,000 each.

That was not the inheritance they had imagined. They had talked for years about the house, about what they might do with it, about keeping it or selling it and splitting the proceeds of what they had assumed was unencumbered equity. But the inheritance they imagined had been funded by money their mother spent living — on heat and groceries and property taxes and a single week in Galveston that James only learned about after reading through her bank statements.

The attorney helped them see it that way. She had used her asset. She had the right to. What she had not done — what the estate plan had not done — was tell them in time to prepare. That gap, between what she knew and what they did not, was the only thing that needed fixing.

A conversation, a line in the estate documents, an executor briefed on the HUD timeline: any of those would have changed the experience of those six months, even if it could not have changed the number.

If a Reverse Mortgage Is Part of Your — or a Parent's — Estate

If you are a Texas senior with a reverse mortgage, or if you suspect a parent may have one, the time to understand the implications is before a servicer call arrives. The questions to answer now:

• What is the current outstanding balance, and who is the servicer?
• What is the home's current market value, and how does it compare to the balance?
• Does the executor know about the loan and understand the HUD notification deadline?
• Is there a Lady Bird Deed on the property, and does it interact correctly with the HECM?
• Is Medicaid currently being received, or is it a possibility in the future? If so, how does estate recovery affect the plan?
• Is there life insurance that could be directed toward the HECM payoff, preserving the home for heirs?

Taylor Willingham, the founding attorney at WG Law, has guided more than 10,000 Texas families through estate planning and elder law decisions — including the integration of reverse mortgages, Medicaid planning, and estate administration into a coherent plan that protects heirs without leaving them surprised. He is the author of five published books on estate planning and elder law, has been recognized as a Super Lawyers Rising Star from 2019 through 2022, and has handled more than 2,000 probate cases for families across North Texas. WG Law serves clients from offices in McKinney (7701 Eldorado Pkwy, Suite 200) and Southlake (1560 E Southlake Blvd, Suite 100, Office 116), with 350+ five-star Google reviews from clients throughout the DFW metroplex.

Call 214-250-4407 or contact WG Law to request a consultation. If a reverse mortgage is part of your estate — or may be part of a parent's — that is worth knowing before the servicer call does the telling for you.

For related reading, see our articles on protecting your home from Medicaid estate recovery in Texas, how the Texas Medicaid Estate Recovery Program works, Lady Bird Deeds in Texas estate planning, and the Texas Medicaid five-year look-back period. For a full overview of elder law planning for North Texas seniors, visit our elder law practice area page.

This article is provided for general informational purposes only and does not constitute legal advice. Reverse mortgage rules, HUD servicing guidelines, Texas Medicaid estate recovery, and estate planning considerations depend on individual facts, current regulations, and applicable law. Nothing in this article should be relied upon as legal advice regarding any specific estate, loan, or planning decision. Consult a licensed attorney before making decisions about reverse mortgage payoffs, Lady Bird Deeds on encumbered property, Medicaid planning, or estate administration involving HECM loans.