Proprietary Reverse Loans Give Younger Homeowners More Options

In an effort to nudge older homeowners to tap into their home equity, the reverse mortgage space is expanding beyond federally backed offerings as lenders develop proprietary products with fewer restrictions.

The push reflects a confluence of factors: rising home values, inflation, relatively high mortgage rates and a swelling population of Americans nearing or entering retirement. Unlike the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM) program, proprietary products often target younger borrowers, allow for higher loan amounts and give homeowners more flexibility in how they access cash.

A reverse second-lien mortgage

Industry leaders say these offerings are quickly gaining traction and could play a larger role in retirement planning in the years ahead. Finance of America, for one, has reported strong interest in its “HomeSafe Second” program, which it says is the only reverse second-lien mortgage available in the U.S. The product allows borrowers to retain their existing low-rate first mortgage while taking out a reverse second lien with no monthly payments.

Finance of America’s chief production officer, Jonathan Scarpati, said the program is currently available in about 15 states and open to homeowners as young as 55, compared with the FHA’s HECM program, which requires borrowers to be 62 or older.

Scarpati told HousingWire that he imagines that demand for states to allow the product will continue to rise, especially as high rates, inflation and fixed incomes have made it harder for older homeowners to qualify for or afford traditional loan options. “It allows them to preserve their low first interest rate, without having to refinance, but still tap the money they need,” he said.

“HomeSafe Second does have somewhat limited availability today, because there are some state rules and regulations around the country that limit the opportunity for a second lien product. But, we are working with lobbyists to help them understand the ‘why’ behind and that is a secure solution for these customers, so I think that’s going to change over the course of the next year or two.”

He noted that the product is especially useful for pre-retirees with limited or fixed incomes, who may not qualify for traditional second-lien products because of debt-to-income ratios. “This is a very refreshing way to still tap your home equity at a time when you really need it and not add any additional payments,” Scarpati said.

The pool of potential borrowers is expanding rapidly. AARP estimates that 10,000 Americans turn 65 every day. By 2050, the number of older adults is projected to more than double, reaching over 88 million people and accounting for more than 20% of the population.

A wealth management tool

Mutual of Omaha Mortgage, a subsidiary of Mutual of Omaha, is also leaning into proprietary products with its SecureEquity line, launched just six months ago. Alex Pistone, president of Mutual of Omaha Mortgage, said borrower response has been “incredible.”

“Borrowers often prefer SecureEquity over standard HECMs for their enhanced flexibility and higher loan amounts, which better align with modern financial needs,” Pistone said. “These products are gaining traction for their efficiency and customization.”

Pistone said SecureEquity is especially useful for younger borrowers who are not yet eligible for HECMs, homeowners seeking higher loan-to-value options with lower upfront costs or those needing loans above FHA’s lending limits.

Pistone said proprietary reverse mortgages could soon become a mainstream part of retirement planning and wealth management. “SecureEquity has tremendous potential to play a bigger role … shifting from a niche tool to a strategic asset in holistic financial strategies,” he said. “It allows retirees to tap into home equity for longevity planning, portfolio diversification, or even delaying Social Security claims to maximize benefits.”