Quick Answer
A proprietary reverse mortgage is a privately funded reverse mortgage product that is not insured by the FHA — offering access to home equity above the HECM's lending limit, California's age-55 eligibility, and in some cases lower costs (no FHA MIP) — in exchange for the absence of the HECM's federal consumer protections and fee caps.
- Not FHA-insured — private lender product with private non-recourse guarantee.
- Access home equity above the $1,249,125 HECM lending limit.
- California age-55 eligibility — 7 years earlier than HECM's 62.
- No FHA MIP — saves $17,983 to $24,983 at closing.
- No federal origination fee cap — compare carefully between lenders.
- Primary California products: HomeSafe Standard, HomeSafe Second, HomeSafe Select.
Key Facts
| Topic | Key Fact |
|---|---|
| FHA insurance | None — private lender guarantee instead |
| Age eligibility (CA) | 55+ for California proprietary programs |
| Lending limit | None — based on full home value |
| FHA MIP | None — significant cost saving at closing |
| Origination fee cap | None — market-determined, compare carefully |
| Non-recourse guarantee | Private lender guarantee — similar protection but different backing |
| Primary 2026 lenders | Finance of America Reverse, Longbridge Financial, Mutual of Omaha |
| HUD counseling | May be required — confirm with specific lender |
Detailed Explanation
The proprietary reverse mortgage market expanded significantly in California following the HECM's lending limit constraints. California homes regularly exceed the $1,249,125 HECM lending limit, and the proprietary market developed to serve these higher-value properties with reverse mortgage financing that accesses the full home value. The market now includes programs for California age-55 borrowers, a Reverse Second Mortgage product, and jumbo programs for homes with values of $2 million to $6 million or more.
The absence of FHA insurance is the fundamental structural difference between HECM and proprietary programs. The FHA insurance fund backs the HECM's non-recourse guarantee, the line of credit's contractual freeze protection, and the continued tenure payment obligation beyond the principal limit. Proprietary programs must replicate these protections through their own private guarantee mechanisms — which they do in practice but through different legal and financial structures. The practical protection for borrowers is similar, but the institutional backing differs.
The cost structure of proprietary programs differs in two key ways: no upfront or annual FHA MIP (saving $17,983 to $24,983 at closing plus 0.5% annual accrual), but no federal origination fee cap (meaning lender fees can vary dramatically). For competitive California proprietary lenders, the elimination of the MIP typically more than offsets the origination fee — producing a lower total closing cost than the comparable HECM. For non-competitive lenders, inflated origination fees can reverse this advantage entirely. Comparison shopping is absolutely essential for proprietary programs.
The California age-55 proprietary programs represent the most unique element of California's reverse mortgage market. In most other states, no reverse mortgage is available below age 62. California's proprietary programs allow homeowners as young as 55 to access equity — seven years earlier than HECM eligibility. This seven-year head start on line of credit compounding and mortgage payment elimination represents significant financial value for California homeowners who establish the credit reserve early.
Jay Zayer, CRMP — 18 Years Experience
The HECM versus proprietary decision is the one I model most carefully in California consultations. For homes under $1.25 million with no existing mortgage: HECM is usually the better choice (lower rate, federal fee cap, stronger consumer protections). For homes over $1.25 million: proprietary provides higher proceeds and lower cost (no MIP). For homes with a low-rate first mortgage: HomeSafe Second preserves the rate. For borrowers under 62: proprietary is the only option. The decision tree is clear once the specific facts are known.
Who This Is Right For
This may be a good fit if:
- Your California home value exceeds the $1,249,125 HECM lending limit and you need the full value accessed
- You are between 55 and 61 years old in California — HECM is not available below 62
This may NOT be the right fit if:
- Your home value is well within the HECM lending limit and you are 62+ — the HECM's federal consumer protections are preferable
Common Misconception
Myth: Proprietary reverse mortgages are less safe than HECMs.
Fact: Competitive proprietary programs from licensed California lenders provide similar non-recourse protections through private guarantee mechanisms. The key difference is that the backing comes from the lender rather than the FHA insurance fund. Review the specific program's guarantee terms.
Source: California DBO: Licensed lender requirements
Authoritative Sources
- Finance of America: HomeSafe programs — financeofamerica.com
- NRMLA: Proprietary reverse mortgages — nrmlaonline.org
- California DFPI: Licensed reverse mortgage lenders — dfpi.ca.gov
People Also Ask
What is the difference between a HECM and a proprietary reverse mortgage?
HECM: FHA-insured, $6,000 origination fee cap, $1,249,125 lending limit, age 62+. Proprietary: Private insured, no fee cap, no lending limit, age 55+ in California.
Is a proprietary reverse mortgage safe?
Competitive proprietary programs from licensed California lenders provide similar non-recourse protections to HECMs. Comparison shop and verify the lender's license with the California DFPI.
Do I need HUD counseling for a proprietary reverse mortgage?
Some proprietary programs require counseling; others do not. Confirm the specific requirement with the lender before applying.