— ABOUT Reverse Mortgages

Jumbo Proprietary Reverse Mortgage – a non-FHA reverse mortgage product available through select private lenders for homeowners with higher-value properties that exceed the FHA HECM lending limit. As a mortgage broker, Pacific Home Loans works with multiple lenders offering proprietary jumbo reverse mortgage products, allowing us to match eligible borrowers with the program that best fits their property value, equity position, and financial goals.

Both programs are available across all states where Pacific Home Loans is licensed. A reverse mortgage is a long-term financial commitment with material implications for estate planning, retirement cash flow, and housing equity. Pacific Home Loans encourages all prospective borrowers to complete HUD-approved counseling and to consult with a qualified financial advisor, tax professional, and estate attorney before proceeding.

→ Mortgage Refinance Programs

— PROGRAM COMPARISON

For many homeowners in Pacific Home Loans’ licensed markets – including high-value coastal communities, resort markets, and the Hawaiian islands – a HECM may not provide access to the full equity available in their property due to FHA lending limit constraints. The jumbo proprietary reverse mortgage is designed to address this gap.

— HOW IT WORKS

The following mechanics apply to both HECM and jumbo proprietary reverse mortgages, with program-specific distinctions noted where applicable.

Equity Access Without Monthly Mortgage Payments
A reverse mortgage converts a portion of the borrower’s home equity into accessible funds. Because monthly principal and interest payments are not required, the program can meaningfully improve monthly cash flow for eligible homeowners who have substantial equity in their primary residence but limited liquidity.

The Loan Balance Grows Over Time
In the absence of required monthly payments, interest accrues on the outstanding balance throughout the life of the loan. For HECM loans, FHA mortgage insurance premiums also accumulate as part of the outstanding balance. The result is a loan balance that grows over time rather than diminishing, which reduces the equity available to the borrower or their heirs at the time of repayment.

A reverse mortgage is not a mechanism for preserving home equity – it is a mechanism for accessing home equity during the borrower’s lifetime. Borrowers and their families should understand this dynamic clearly before proceeding.

The Borrower Retains Title
The homeowner retains title to the property for the life of the loan under both programs. The lender holds a lien on the property but does not take ownership. The loan becomes due when the borrower permanently vacates the property as their primary residence, sells the home, or passes away.

Non-Recourse Protection
Both HECM and jumbo proprietary reverse mortgages are non-recourse instruments, meaning that repayment at loan maturity will not exceed the appraised value of the home at the time of sale, subject to program terms. For HECM loans, the FHA insurance fund covers any shortfall between the outstanding balance and net sale proceeds. For jumbo proprietary loans, the non-recourse protection is governed by the lender’s program terms rather than FHA insurance. The borrower’s other assets, and those of their heirs, are not at risk under either structure.

Ongoing Borrower Obligations
The absence of required monthly mortgage payments does not eliminate all financial obligations associated with the property. For the loan to remain in good standing under both programs, the borrower must:

• Pay property taxes when due
• Maintain homeowner’s insurance coverage at required levels
• Maintain flood insurance if required by program guidelines
• Maintain the property in a condition consistent with applicable minimum property standards
• Continue to occupy the property as their primary residence

Failure to fulfill these obligations may cause the loan to be declared due and payable under either program.

— HECM PROGRAM

The HECM is the federally insured reverse mortgage program administered under FHA guidelines. It is the most widely available reverse mortgage product in the market and carries FHA’s non-recourse protection backed by the federal mortgage insurance fund.

HECM Disbursement Options
Eligible HECM borrowers may receive proceeds in the following structures, subject to available principal limit and program guidelines:

Lump Sum: A single disbursement at closing, available under fixed-rate HECM structures. Appropriate for borrowers with a specific immediate financial objective such as paying off an existing mortgage, funding a large expense, or consolidating obligations.

Monthly Payments: Scheduled monthly disbursements for either a defined term or for as long as the borrower occupies the home as a primary residence. Appropriate for borrowers seeking a supplemental monthly income stream during retirement.

Line of Credit: Proceeds held in a line of credit from which the borrower may draw at any time. A notable feature of the HECM line of credit is that the unused portion grows over time at the same rate as the loan’s interest rate — meaning available credit increases the longer it remains unused, subject to program terms. This growth feature can make the line of credit an effective long-term planning tool.

Combination: A combination of monthly payments and a line of credit, structured to address both ongoing income needs and reserve capacity for future use.

HECM for Purchase (H4P)
The HECM for Purchase program allows eligible borrowers to use reverse mortgage proceeds to finance the acquisition of a new primary residence in a single transaction. This structure enables buyers age 62 and older to purchase a home suited to their retirement needs – downsizing, relocating, or acquiring a more suitable primary residence – without required monthly mortgage payments, using a combination of reverse mortgage proceeds and a down payment sourced from the sale of a prior home or other assets.

The H4P is a purchase transaction rather than a refinance, and it involves its own eligibility requirements, down payment calculations based on the borrower’s age and the property value, and program guidelines. HUD-approved counseling is required prior to application.

The Life Expectancy Set-Aside (LESA)
As part of the HECM process, every borrower undergoes a financial assessment evaluating income, credit history, and demonstrated history of paying property-related obligations. If the assessment identifies limited income capacity or a history of late property tax or insurance payments, FHA guidelines may require a Life Expectancy Set-Aside.

A LESA is a reserve account funded from available HECM proceeds at closing and held by the servicer, which disburses directly to tax authorities and insurance carriers as obligations become due. Because LESA funds are drawn from total available proceeds, establishment of a LESA reduces the proceeds available to the borrower in other forms. A LESA is a protective structure – not a penalty – that enables borrowers who might otherwise not qualify to access the program with an automated mechanism ensuring critical ongoing obligations are met. A LESA may be fully or partially funded depending on the specific findings of the financial assessment.

— JUMBO REVERSE MORTGAGE

The jumbo proprietary reverse mortgage is a non-FHA product available through select private lenders for homeowners whose property values exceed the FHA HECM lending limit. It does not carry FHA mortgage insurance premiums and is not subject to FHA program constraints, which allows for higher loan amounts based on property values that standard HECM financing cannot fully accommodate.

Pacific Home Loans works with multiple lenders offering proprietary jumbo reverse mortgage products. Program availability, loan limits, minimum age requirements, and disbursement structures vary by lender and are confirmed on a transaction-specific basis.

Key Features

• No FHA mortgage insurance premium – neither upfront nor annual
• Higher loan amounts available beyond FHA HECM limits, subject to lender underwriting
• Minimum age of 62 for most programs – select lenders offer programs for eligible borrowers age 55 and older, subject to confirmation of current guidelines
• Non-recourse structure, subject to individual lender program terms
• Proceeds typically available as a lump sum or line of credit, subject to lender program guidelines

Jumbo Reverse Mortgage for Purchase
Proprietary jumbo reverse mortgages may also be available in a purchase structure, allowing eligible borrowers to acquire a new primary residence using jumbo reverse mortgage proceeds – similar in concept to the HECM for Purchase but for properties exceeding FHA lending limits. This structure is appropriate for borrowers purchasing higher-value primary residences who wish to do so without required monthly mortgage payments.

Program availability for the jumbo reverse purchase structure varies by lender, state, and property type. Eligibility and available loan amounts are confirmed during the consultation.

Who a Jumbo Reverse Mortgage May Be Appropriate For

• Homeowners with properties valued above the FHA HECM lending limit
• Borrowers seeking access to greater equity than available under a standard HECM
• Buyers acquiring a higher-value primary residence who prefer a non-FHA reverse mortgage structure
• Borrowers for whom the absence of FHA mortgage insurance premiums produces a more favorable program economics than a HECM

— ELIGIBLE USES

The following applications apply to both HECM and jumbo proprietary programs where available, with program-specific suitability noted:

Elimination of an Existing Mortgage Payment
Refinancing an existing forward mortgage into a reverse mortgage eliminates the required monthly principal and interest payment, which can substantially improve monthly cash flow for a retired homeowner on a fixed income. The existing mortgage is paid off from reverse mortgage proceeds at closing. Available under both HECM and jumbo structures depending on property value.

Supplemental Retirement Income
Monthly disbursements or an accessible line of credit can provide a supplement to Social Security, pension income, or investment distributions. Available under HECM; disbursement structures for jumbo programs vary by lender.

Deferred Line of Credit for Future Needs
The HECM line of credit’s growth feature makes it an effective long-term planning tool for future healthcare costs, home modifications, or other retirement planning needs. The HECM is the primary vehicle for this strategy due to the unused line of credit growth feature not universally available in proprietary programs.

Home Purchase Without Monthly Mortgage Payments
Both HECM for Purchase and jumbo reverse purchase structures allow eligible borrowers to acquire a new primary residence – downsizing, relocating, or transitioning to a more suitable property – without required monthly mortgage payments. The appropriate program depends on the property value relative to the FHA lending limit.

Refinancing an Existing Reverse Mortgage
Homeowners with an existing HECM or jumbo reverse mortgage may benefit from refinancing if property values have increased substantially, if interest rates have changed favorably, or if program structure changes are desired.

— ELIGIBILITY

HECM

• The youngest borrower or eligible non-borrowing spouse must be at least 62 years of age
• The property must be the borrower’s primary residence
• Sufficient equity must be available to support the loan
• HUD-approved counseling must be completed prior to application
• The borrower must satisfy the FHA financial assessment requirements
• The property must meet FHA minimum property standards

Jumbo Proprietary

• Minimum age of 62 for most programs – select lenders offer programs for borrowers age 55 and older, subject to current lender guidelines
• The property must be the borrower’s primary residence
• Property value must exceed or approach the FHA HECM lending limit to make the jumbo structure advantageous
• HUD-approved counseling is required prior to application for most programs
• Eligibility is subject to individual lender underwriting guidelines and program requirements

Eligible Property Types
Both HECM and jumbo programs are generally available for single-family homes and eligible condominiums. HECM financing also accommodates certain manufactured homes meeting FHA standards and multi-unit properties up to four units when the borrower occupies one unit as a primary residence. Jumbo program eligible property types are confirmed by individual lender guidelines.

HUD-Approved Counseling Requirement
Federal law requires that all prospective HECM borrowers complete a counseling session with an independent HUD-approved counseling agency before a loan application can proceed. Most jumbo proprietary lenders also require counseling. The session ensures that borrowers fully understand the program’s mechanics, costs, obligations, and alternatives. A counseling certificate is required as part of the application package for both programs.

→ HUD Housing Counselor Directory

— COSTS AND CONSIDERATIONS

HECM Costs

• Upfront FHA mortgage insurance premium at closing
• Annual FHA mortgage insurance premium accruing to the loan balance
• Standard closing costs – origination fees, title, escrow, and appraisal
• Ongoing interest accrual on the outstanding balance

Jumbo Proprietary Costs

• No FHA mortgage insurance premium – upfront or annual
• Origination fees and closing costs per individual lender program guidelines
• Ongoing interest accrual on the outstanding balance
• Specific fee structures vary by lender and are disclosed at application

Impact on Estate and Heirs
For both programs, the loan balance grows over time and must be repaid when the borrower no longer occupies the home, reducing the equity available to heirs. Heirs may repay the outstanding balance and retain the property, or sell the home and apply the proceeds toward repayment. The non-recourse feature of both programs ensures that repayment cannot exceed the home’s appraised value at the time of resolution.

Tax Recapture – HECM
Federal law includes a recapture tax provision for HECM-assisted mortgages. If the property is sold within nine years of the original purchase and the borrower’s income has increased above defined thresholds at the time of sale, a portion of the HECM benefit received may be subject to federal recapture tax. Borrowers should consult a qualified tax professional for guidance specific to their situation. Pacific Home Loans does not provide tax advice.

— COMMON QUESTIONS