From the link provided by Collie;
Upon the sale of the property, all remaining equity belongs to the heirs, just as with a forward mortgage. A reverse mortgage is a non-recourse loan. Which means that, if with the combination of the accrued interest and current market conditions the property will not sell for enough to repay all amounts owed on the loan, then the borrowers’ heirs are not liable for any additional amounts owed.
As previously mentioned, borrowers pay for mortgage insurance to the Federal Housing Administration (FHA), a division of The Department of Housing and Urban Development (HUD) which guarantees that the borrower and the borrowers’ heirs will never owe more than the property is worth on a bona fide sale to a third party. The program does require a bona fide sale to a non-related third party, heirs cannot “sell” the home to other family members for less than is owed on the reverse mortgage expecting the FHA insurance to cover any shortfall to the lender on the amount owed (there are no restrictions on sales to family members or otherwise, just in the case of a balance of the reverse mortgage being higher than the value of the property and heirs wanting the lender to forgive the over value portion of the loan and still keep the property within the family).
I took a seminar from Citizens Bank of the Villages about Reverse Mortgages last November and met with the loan officer Jennifer last week. They have handled about 400 reverse mortgages in TV and then resell to Sun West Mortgage. They provide the money using the appraised value of your home. In most cases homes increase in value, especially in Florida. There were changes to the law last Oct 2, right now they'll give you about 43% of the appraised value. Whatever funds you don't draw out, will accumlate interest at 5.5%. So if you had a balance or line of credit of $45,000 and didn't touch it, in five years it would have grown to $60,000. So in the OP's case, his father might still have money that is available that could be used to pay off the loan, but in any event he will not be responsible.
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