Quick Answer
A proprietary (or 'jumbo') reverse mortgage is a private loan for California homes worth more than the FHA HECM limit of $1,249,125, with loan amounts reaching $3–4 million or more. Because it isn't FHA-insured, it charges no FHA mortgage insurance premium, but it also lacks the federal non-recourse and Non-Borrowing Spouse protections of a HECM — so terms vary by lender and should be compared carefully.
What Is a Proprietary Reverse Mortgage?
A proprietary reverse mortgage is a private loan product — offered by private lenders rather than through FHA insurance — designed for homes that exceed the FHA HECM lending limit. Because the FHA cap limits the max claim amount to $1,249,125, a homeowner with a $2 million home accessing an FHA HECM is effectively borrowing against a $1.2M home. A proprietary loan uses the full home value — up to program limits, often $4M or more — as the basis for calculating available loan amounts.
Key Differences from an FHA HECM
The critical differences:
- 1No FHA mortgage insurance premium — a 2% upfront savings on a $2M home equals over $24,000.
- 2Higher loan amounts for luxury and high-value properties.
- 3Some programs allow borrowers as young as 60 versus 62 for a HECM.
- 4No FHA non-recourse guarantee — instead, lenders offer contractual non-recourse terms.
- 5No required HUD counseling in all cases (some programs still require it).
- 6Often a more limited line-of-credit growth feature compared to HECM.
California Markets Where Proprietary Loans Are Most Common
California has the highest concentration of proprietary reverse mortgage candidates in the nation. Key markets include: coastal Orange County (Newport Beach, Laguna Beach, Huntington Beach); the Westside and hills of Los Angeles (Beverly Hills, Brentwood, Pacific Palisades, Malibu); San Diego coastal areas (La Jolla, Del Mar, Coronado, Rancho Santa Fe); and appreciating inland communities (Rancho Cucamonga, Corona, Temecula, Murrieta). In these areas, homes routinely appraise at $1.5M–$5M+.
How Loan Amounts Are Calculated
Like FHA HECMs, proprietary loans use an age-based Principal Limit Factor applied to the full home value (up to program limits, usually $3M–$4M). A 70-year-old with a $2M home might access $650,000–$900,000 in net proceeds — significantly more than the ~$550,000 from an FHA HECM on the same property. Rates, lender programs, and underwriting criteria vary, so comparison shopping through a broker is particularly valuable for proprietary loans.
Non-Recourse Protections Without FHA Insurance
The absence of FHA insurance does not leave heirs unprotected. Most proprietary lenders include contractual non-recourse provisions — meaning heirs never owe more than the home's fair market value at the time of repayment. However, unlike the FHA model, the protection is backed by the lender's own capital rather than a government fund. Working with a financially established, reputable lender is therefore more important for proprietary loans than for HECMs.
Cost Comparison: No FHA MIP
Without the 2% FHA MIP, proprietary loans can have meaningfully lower upfront costs for high-value homes. On a $2M home, FHA MIP alone would be $24,983 (2% of the 2026 lending limit). Proprietary programs substitute risk-based pricing, typically a higher interest rate rather than an upfront premium. Over a short horizon (5–10 years), the no-MIP proprietary loan may be more economical. Over a longer horizon, the HECM's government-backed protections and guaranteed growing credit line may outweigh the upfront savings.
Is a Proprietary Loan Right for You?
A proprietary reverse mortgage is typically best when: your home is valued significantly above $1,249,125, you want to minimize upfront costs, your heirs understand the contractual non-recourse terms, and you plan to stay in the home for at least 5–7 years. If your home is near or below the FHA limit, the HECM's government-backed protections and growing line of credit are often more valuable. We can model both programs side by side for your specific situation.
