Proprietary Reverse Mortgages Outpace HECMs, Fee Transparency Lacking

Proprietary reverse mortgages have surpassed the volume of federally insured Home Equity Conversion Mortgages (HECMs), with originations reaching an estimated $953 million in the first quarter of 2026, compared to HECM volume totaling approximately $875 million during the same period, according to New View Advisors. This significant market shift underscores a growing consumer demand for alternative financing options for older homeowners, particularly those with higher-value properties or specific financing needs that fall outside FHA guidelines. Proprietary reverse mortgages also allow borrowers to access these loans starting at age 55 in certain states, a younger age than typically permitted for HECMs. Despite this growth and the benefits proprietary products offer, a critical issue of fee transparency has emerged. Unlike HECMs, which have federally mandated caps on origination fees, proprietary reverse mortgages do not have such federal limitations. This absence of regulation can lead to substantial origination fees, as illustrated by a case where a borrower was presented with an origination fee exceeding $42,000 for a proprietary reverse mortgage. The borrower in this instance was able to save over $40,000 by seeking a second opinion and ultimately closing on a loan with significantly lower fees. This experience highlights a potential widespread problem, as many borrowers may not seek additional opinions before committing to a loan with excessive costs. The legality of such high fees does not always equate to fairness for the consumer. The expansion of proprietary reverse mortgages, while beneficial for providing more options to older homeowners, brings with it a responsibility to ensure fair practices. The industry's growth in this segment necessitates a closer examination of fee structures and a potential call for increased transparency or regulation to protect consumers from potentially exorbitant charges. The current landscape suggests that while product innovation is meeting consumer demand, the accompanying fee structures require greater scrutiny to ensure that the benefits of these loans are not overshadowed by prohibitive costs. The market's trajectory indicates that proprietary reverse mortgages are no longer a niche offering but a substantial part of the reverse mortgage industry, making the issue of fee transparency a pressing concern for regulators and consumers alike.