Proprietary reverse mortgages powered the sector to $9.65 billion in volume during 2025, while traditional Home Equity Conversion Mortgages (HECMs) struggled amid rising interest rates. The shift underscores how non-government-backed loans reshape the reverse mortgage landscape for older homeowners seeking liquidity.
HECMs, the government-insured standard since 1989, rely on Federal Housing Administration backing. That safety comes with rate caps and borrowing limits. Proprietary reverse mortgages bypass those constraints. Lenders set their own terms, allowing higher loan amounts and more flexible structures. For borrowers with substantial home equity, proprietary products deliver larger payouts.
Rising rates hurt HECM economics. The FHA-backed program depends on interest rate spreads. Higher rates compress lender margins, making originations less profitable. Borrowers also saw reduced available funds as rates climbed. Proprietary lenders adapted faster, adjusting pricing to maintain volume while HECM originations flatlined.
Proprietary loans appeal to homeowners aged 62 and older with substantial equity. A borrower with a $1.5 million home in coastal California or New York might qualify for $400,000 to $600,000 through a proprietary product, versus capped amounts under HECM rules. That flexibility attracts affluent retirees wanting to tap equity without selling.
For lenders, proprietary loans carry higher risk but steeper profit margins. Without government insurance, they hold the default risk. That calculus changes when rates rise and home values stabilize. Lenders tightened underwriting but remained willing to fund qualified borrowers.
Rental market implications matter too. Some landlords over 62 use reverse mortgages to refinance investment properties or extract equity. Proprietary loans enable larger