The reverse mortgage market world heads in reverse away from the government created Home Equity Conversion Mortgage (HECM) and towards new propriety products. This is an encouraging sign because any healthy market needs competition, innovation, and variety. However, recently HECM program has been the driving force behind the reverse mortgage world, leaving many without an ideal solution to utilizing home equity as part of a sustainable retirement plan.
In 2017, HUD and the FHA changed the reverse mortgage rules, which shifted the mortgage insurance premiums (MIP) paid on HECMs. Instead of paying a higher MIP over the course of the loan, most borrowers now pay a higher MIP upfront and a lower MIP over the course of the loan. This higher initial MIP does create some sticker shock and caused a drop in reverse mortgage applications after it went into effect. The drop off of applications and loans has caused the reverse mortgage world to react in considering a more diversified product offering. As such, a focus on proprietary products to both supplement the HECM and to compete against it have started to develop.