Regradless of what the mortgage company did, you can't take any action on anything of your mother's estate unless you file a Petition to probate her will and get Letters that give you the authority to act on behalf of the estate. There may have been a clause in the reverse mortgage that gave the mortgage company the right to sell the house but this can't be determined unless there is a review of the mortgage agreement and you have the authority to handle her estate. Just because she left a will doesn't automatically give you legal authority to handle the estate.
The house is not likely sold but probably will be if you don't move quickly. That said if there is no equity you shouldn't care. If there is equity see an attorney and open probate ASAP. Don't wait or it wi be too late.
“Is this legal?” It is difficult to say without an examination of the chain of title and the facts. If you did not open a probate estate, there would be no reason or legal requirement for the lender to contact you unless you filed a request for special notice. You have no standing under a will unless it is admitted to probate and you are named administrator.
If your mother or her successor in interest did not keep up the mortgage payments a trustee foreclosure sale is the end result. This appears to be what happened. A lender is not obligated to agree to a short sale nor to allow an heir or beneficiary to purchase the home for less than is owed on the note.
If you want an answer to your question, you really need to pay for a an attorney to investigate the chain of title and the facts to further advise you.
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If you name is not on the title, the mortgage company can sell it if the mortgage is unpaid.
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