Reverse Mortgages Could Get Cheaper and Easier Under New Proposals

If you’ve ever looked into a reverse mortgage and felt overwhelmed by the costs, paperwork, or confusing rules, you’re not alone. Many seniors who want to tap their home equity decide not to because the process feels too expensive or too complicated.

The Mortgage Bankers Association (MBA) says it hears these frustrations constantly. In its recent letter to federal housing officials, the MBA argues that today’s reverse mortgage system “discourages many potential borrowers” because of steep upfront costs and an overly burdensome loan process.

In response, the group is urging HUD to make several big changes. If those changes move forward, reverse mortgages could become much more appealing and far more affordable by 2026.

Here’s what might change, and why it matters for someone considering a reverse mortgage.

Why are these changes being proposed?

According to the MBA, reverse mortgage demand is strong. Many seniors want a way to tap into their home equity without having to sell or make monthly mortgage payments. But actual loan volume isn’t growing.

The reason? Cost and complexity.

• The upfront mortgage insurance fee is 2% of your home’s value - often tens of thousands of dollars.
• The loan process can feel slow and confusing.
• Appraisals, counseling, and servicing transfers add more friction.
• Some rules, like set-asides for taxes or insurance, lock away equity seniors would prefer to use.

These barriers push many homeowners away before they ever complete an application.

MBA’s recent proposals aim to lower costs, reduce hassle, and make the program easier to understand and navigate.

Reverse mortgages could become much cheaper to open

One of the biggest issues for borrowers today is the upfront mortgage insurance premium (MIP). Right now, it’s a flat 2% of the home’s value, even if you only need a small loan amount.

MBA argues this fee is “excessive” for many homeowners, especially those who want to access just a portion of their equity. Instead of basing the fee on the property’s value, it proposes calculating it based on the amount actually borrowed.

For seniors comparing financial options, that shift could make reverse mortgages far more affordable and less intimidating.

More usable equity for homeowners

The amount you can borrow through a reverse mortgage is determined by principal limit factors (PLFs). Currently, PLFs are conservative, meaning many borrowers end up with less usable equity than expected.

MBA believes this discourages some seniors from moving forward. Raising PLFs would give borrowers access to more funds, particularly helpful for covering in-home care, medical expenses, or home updates to support aging in place.

Fewer automatic set-asides for taxes and insurance

Another recommendation deals with Life Expectancy Set-Asides (LESAs), which reserve part of the loan for future taxes and insurance. While important for borrowers at risk of falling behind, a universal LESA rule would tie up too much equity for people who are financially stable.

MBA “strongly opposes” a blanket requirement, arguing that LESAs should be used only when truly needed.

For borrowers, that would mean keeping more control of their own funds rather than having them locked away automatically.

Appraisals could get faster (and cheaper)

Many seniors cite the appraisal process as one of the most confusing parts of getting a reverse mortgage. Sometimes two appraisals are required, leading to delays and extra costs.

MBA wants FHA to modernize how properties are valued, including expanding the use of automated valuation models (AVMs). These tools could reduce the need for multiple appraisals and speed up the approval timeline. It also encourages broader use of digital tools and remote counseling, all small changes that could make the entire process more manageable for older borrowers.

The counseling and application process could become more flexible

Many seniors say the reverse mortgage process feels overwhelming long before they reach closing. Counseling sessions can be hard to schedule, paperwork stacks up quickly, and some steps still require in-person meetings that aren’t always practical.

The MBA is urging HUD to expand remote counseling options and modernize the application experience with more digital tools. These improvements could streamline the entire process by reducing appointments, eliminating unnecessary back-and-forth, and making paperwork simpler to manage.

Behind the scenes: lenders could face fewer liquidity challenges

This part doesn’t directly affect your day-to-day experience as a borrower, but it could help stabilize the market and even lead to better pricing.

Today, lenders must buy loans out of Ginnie Mae securities once they hit 98% of their maximum claim amount. That’s expensive, and MBA says it strains the reverse mortgage system.

Their proposals would allow lenders to re-securitize those loans instead, and let private companies keep servicing loans even after FHA takes assignment.

What this could mean for borrowers:

• More stable lenders
• Less servicing confusion
• Potentially more competitive loan pricing down the line

The bottom line: Reverse mortgages could become more senior-friendly

MBA says its proposals would “help lower costs for consumers, increase adoption, and enhance long-term sustainability” of the program.

For homeowners considering a reverse mortgage, the message is simple: If HUD adopts these changes, the program could become cheaper, easier, and more flexible, making it a more realistic option for many seniors in 2026.

HUD is accepting feedback on these ideas now, and decisions are expected in 2025.