The silent shift reshaping reverse mortgages

Proprietary reverse mortgages now account for more industry volume than federally insured HECMs. Tennessee is about to become the next state to legalize them, marking a milestone in the evolution of retirement financing.

The Big Picture

The Tennessee Reverse Mortgage Innovation Act, which has passed both legislative chambers and awaits Governor Bill Lee's signature, is the result of years of lobbying by loan officers Nathan Guerrero and Jackson Matheson. Guerrero, president of Mortgage South, and Matheson, an LO with Fairway Home Mortgage, identified a legal gap that prevented seniors from accessing jumbo reverse mortgages in the state. The law amends state code to explicitly allow proprietary reverse mortgages, removing barriers that had limited competition and consumer choice.

The reverse mortgage market has undergone a seismic shift. Proprietary products now capture more market share than traditional FHA-insured HECMs. This change accelerated after the FHA lowered principal limits and raised upfront mortgage insurance premiums nearly a decade ago, making HECMs less attractive for high-value homeowners. According to industry data, proprietary loans accounted for over 50% of total reverse mortgage origination volume in 2025, a trend expected to continue.

Matheson, a U.S. Army veteran who entered the mortgage business in 2020, was motivated after repeatedly losing leads for jumbo reverse mortgages in the Nashville area. "This was a little bit reactive — like 20% reactive. We had to fix it for today, but I think it's 80% proactive for the future and letting our industry continue to grow," he said. Guerrero had been building legislative relationships for years through the Tennessee Mortgage Bankers Association (TMBA), laying the groundwork for this moment.

“"Getting anything like this done comes down to relationships and making those investments over time." — Nathan Guerrero”

By the Numbers

• Market volume: Proprietary reverse mortgages now account for more volume than federal HECMs, per the source. In 2025, proprietary loans constituted approximately 55% of total originations.
• Years of groundwork: Guerrero has been laying legislative foundation for years through the Tennessee Mortgage Bankers Association (TMBA).
• Company longevity: Mortgage South, founded in 1986, originated the state's first HECM in 1993.
• Industry support: Longbridge Financial, which finances many of Guerrero and Matheson's deals, called the law "long overdue."
• Age requirement: Borrowers must be at least 62, same as for HECMs.
• Loan limit: Private loans can exceed the HECM limit of $1,089,300 (2025), allowing jumbo amounts up to $4 million or more.

Why It Matters

The passage of this law has implications beyond Tennessee. It signals a national trend where states are updating regulatory frameworks to accommodate more flexible retirement financial products. As baby boomers age and accumulate home equity, demand for retirement options that don't require selling the home or making monthly payments continues to grow. Americans over 62 hold an estimated $13 trillion in home equity, and proprietary reverse mortgages offer a way to tap that equity without triggering capital gains taxes.

The clear winners are seniors with high-value homes who previously didn't qualify for HECMs due to loan limits. Also winning are originators like Guerrero and Matheson, who can now compete on a level playing field with other states. Potential losers are traditional HECM lenders, who face growing competition from more flexible proprietary products. Additionally, investors in reverse mortgage-backed securities (HMBS) may see shifts in market dynamics as private loans gain share.

NRMLA also played a key role by proposing an amendment to include second-lien loans, a format gaining popularity. "NRMLA is delighted TN passed HB 2383, as amended with the language we proposed, which removed the definition of a reverse mortgage as a first lien mortgage," said Steve Irwin, NRMLA president. This amendment allows homeowners with existing mortgages to obtain a second-lien reverse mortgage, further expanding options.

What This Means For You

If you're a Tennessee homeowner over 62, you'll soon have more options to tap your home equity without selling. Proprietary reverse mortgages offer higher loan amounts and more flexible requirements than HECMs.

1. 1Assess eligibility: If your home is worth over $1 million, you likely now qualify for a jumbo reverse mortgage that wasn't available in Tennessee before. Private loans may also suit lower-value properties if you seek more flexible terms.
2. 2Compare products: Private loans have no FHA upfront mortgage insurance, reducing closing costs. However, interest rates may be higher than HECMs. Compare total loan cost including rates, points, and servicing fees.
3. 3Consult specialists: Seek originators experienced in proprietary reverse mortgages, like those who championed this law. Ask about their experience with jumbo products and knowledge of Tennessee-specific requirements.

What To Watch Next

Governor Bill Lee is expected to sign the bill into law imminently. Once enacted, Tennessee joins a growing list of states allowing proprietary reverse mortgages, including Florida, Texas, and California. Implementation may take 30-90 days as lenders prepare to offer new products.

The next catalyst will be market reaction: How many originators will get trained on these products? Will we see a wave of refinancings from existing HECMs to private loans? Additionally, other states may follow Tennessee's lead, especially those with growing senior populations like Arizona, North Carolina, and Colorado. Investors should monitor origination rates and HMBS volumes to gauge impact.

The Bottom Line

The Tennessee Reverse Mortgage Innovation Act is a case study in how two loan officers can change the law to benefit an entire industry and consumers. For investors and industry professionals, the signal is clear: proprietary reverse mortgages are the future of retirement financing. Keep an eye on how this law is implemented and which other states jump on the bandwagon. The combination of an aging population, high home equity levels, and a favorable regulatory environment suggests proprietary reverse mortgage growth will continue accelerating in the coming years.