Why the HECM Is the Gold Standard for Reverse Mortgages
There are two types of reverse mortgages in California: HECM loans backed by the federal government, and proprietary reverse mortgages offered by private lenders. For most California homeowners, the HECM is the right starting point — because of what the FHA insurance backing actually provides.
When a HECM closes, the federal government guarantees three things that private reverse mortgages cannot always promise:
- You will receive your loan proceeds as agreed — even if the lender fails or goes out of business
- Your line of credit will not be frozen or reduced — even if the home's value declines
- Your heirs will never owe more than the home is worth — FHA covers any shortfall at the time of repayment
These three protections make the HECM uniquely safe among reverse mortgage products. For a California retiree making a major financial decision, they matter enormously.
Understanding HECM Costs and the Principal Limit
The amount you can access through a HECM is called the Principal Limit. It is calculated based on three factors: your age (or the age of the younger borrower), the current HECM interest rate, and the lesser of your home's appraised value or the FHA lending limit ($1,149,825 in 2026).
In general terms: the older you are, the lower the interest rate environment, and the higher your home value relative to the limit — the more you can access. Typical California borrowers can access 40–65% of their home's value.
HECM Costs to Understand
Upfront MIP (UFMIP)
2% of the lesser of appraised value or $1,149,825. Can be financed into the loan. This funds the FHA insurance that protects both you and your heirs.
Annual MIP
0.5% of the outstanding loan balance per year, added monthly. This maintains your FHA insurance coverage throughout the loan's life.
Origination Fee
Capped by HUD: 2% of the first $200K of home value + 1% of remaining value, max $6,000. Can be financed.
Closing Costs
Appraisal, title, settlement fees — similar to a conventional refinance. Most can be financed, minimizing out-of-pocket costs.
HECM vs. Proprietary Reverse Mortgages in California
For California homeowners with high-value properties, proprietary (jumbo) reverse mortgages can access equity above the $1,149,825 HECM limit. Here is when each makes sense:
Homes valued under $2M. Maximum consumer protections. Independent counseling. Line of credit with guaranteed growth. Most California borrowers start here.
Homes valued $2M+. Access equity above the FHA limit. No UFMIP. Fewer regulatory requirements. Less consumer protection — lender underwriting sets the terms.
Rudy works with both HECM and proprietary reverse mortgage lenders in California. He will show you both options with real numbers so you can make an informed decision.
HUD Counseling — What to Expect
Every HECM borrower in California is required by law to complete a session with a HUD-approved, independent housing counselor before their application can be processed. This is not a sales call — the counselor works for you, not the lender.