Innovations in reverse mortgage lending will drive growth in 2026

The reverse mortgage market is expected to see growth in 2026 as lenders and originators adapt to evolving interest rate conditions and innovate to reach more borrowers.

John Lunde, founder and president of Reverse Market Insight, said that 2025 marked a shift in focus for many originators, as they recognized that mortgage rates might not return to the levels that supported higher refinancing volumes in previous years.

“The rates might stay high for longer than originators can wait, so more proactive growth strategies are picking up steam,” Lunde said. “In our perspective, that largely means increasing distribution of the product, which is why we’re partnering with our clients on Reverse Qualifier to make that more achievable for more reverse originators than ever. I’d expect that kind of growth focus to continue in 2026.”

Home Equity Conversion Mortgage (HECM) pricing improved over the course of 2025, benefiting borrowers through slower interest accrual and increased cash available on new loans, according to Lunde.

But Chris Mayer, CEO of Longbridge Financial, points out that HECMs have not been the key driver of industry growth.

“There has not been a lot of growth in the HECM space,” Mayer said. “New originations have almost entirely been driven by what the 10-year rate is in the market. HECMs go up when the 10-year rate goes down, and HECMs go down when the 10-year rate goes up.

I do think we’re going to see some growth in the HECM space in 2026, but the bulk of it is in proprietary products.”

Shift to private-label products

Steve Irwin, president of the National Reverse Mortgage Lenders Association (NRMLA), said 2025 was a positive year overall, even if that momentum was not fully reflected in Federal Housing Administration (FHA) endorsement figures.

“There was an ever-increasing interest in pursuing reverse mortgages as a tool to monetize home equity that senior homeowners have built up over time,” Irwin said. “However, given the current interest rate environment, we saw challenges with people qualifying and challenges with the high upfront mortgage insurance premium that comes with the FHA-insured product.”

Irwin said growth in the private-label reverse mortgage space helped offset these challenges, something that’s expected to continue in 2026. “We see a lot of innovation and creativity in product development in the proprietary product space,” Irwin said.

“We are seeing a very robust investor appetite, and that is also a leading indicator of production and innovation in the marketplace.”

Lunde says that proprietary products have the potential to grow the overall market in 2026 after gaining market share in 2025.

“In parallel, proprietary lenders have introduced significant improvements in LTV/PLF ratios for new loans as that market has heated up, along with product innovations addressing new market segments for property types, lien position and line of credit structure.”

Mayer said that aside from proprietary products, Longbridge’s HELOC for Seniors offering is helping the company to reach a wider audience.

“We’re seeing more conversations with borrowers who may not fully understand reverse mortgages, and these products open up the discussion,” he said. “There are a lot of people who are nervous about the term ‘reverse mortgage.’ There’s some stigma associated. The HELOC product gets seniors out of that path and blurs the lines because it’s a HELOC.”

Expectations for the new year

Growth, especially heading into 2026, starts with awareness.

“Companies are starting to realize that we should be looking at the people who aren’t moving ahead with a forward mortgage,” Mayer said. “We should at least be offering them a reverse. That, to me, is the starting point. That’s the lowest-hanging fruit. Take the customers you already have who didn’t move ahead with a product and offer them a reverse.”

Mayer said that information is wealth, too, noting that larger, forward mortgage companies are entering the reverse space and using their distribution networks to introduce HECMs to new borrowers. More reverse borrowers will become educated, comfortable and ready.

An end-of-the-year development prompted Mayer’s comments as Blue Owl Capital announced that it’s providing $2.5 billion in liquidity and $50 million in equity to Finance of America to expand home equity and reverse mortgage offerings.

“We’re seeing larger institutions … wanting to put capital into the reverse mortgage, into senior lending,” Mayer said. “I view it as a validation of the space we’re in.”

Another factor that could spur growth, Lunde said, is a potential reduction in the initial mortgage insurance premium (IMIP) for the HECM program.

“If the HECM program were to lower upfront mortgage insurance premiums, I do believe it could unlock a significant level of additional borrower interest given that upfront costs are the biggest negative typically cited by potential borrowers,” he said. “IMIP is far and away the largest closing cost on the loan — and least familiar, given it is much less common on forward mortgage products.”