How Panicked Investors are Helping the HECM

How Panicked Investors are Helping the HECM

In 2025, the HECM lending industry stands at a critical juncture—balancing long-term promise against short-term headwinds. While demographic trends continue to favor a bright future, reverse mortgage professionals are grappling with regulatory hurdles, declining loan volume, and ongoing public misconceptions. The sentiment? Cautious optimism, grounded in realism.

Today, we take a closer look at the state of the market and how former President Trump’s recent tariff strategy has unexpectedly given HECM lenders and borrowers a boost.

Weathering a Challenging Market. Reverse mortgage professionals are feeling pressure from multiple fronts. A key concern is the 10-Year Constant Maturity Treasury Rate (10-Year CMT), which serves as the benchmark interest rate for HECMs. While home values have held steady, prospective borrowers have seen loan proceeds shrink, largely due to rising rates.

From September through November 2024, the 10-year CMT climbed steadily to 4.31%. A brief drop to 4.15% in early December offered some relief, but rates resumed their ascent after the Federal Reserve unexpectedly scaled back its forecasted rate cuts for 2025. The announcement spooked investors, triggering a surge in Treasury yields—and less favorable terms for HECM borrowers.

Turning Tariffs Into Tailwinds. In a surprising twist, what rattled Wall Street may end up benefiting reverse mortgage borrowers.

After Trump unveiled a sweeping package of tariffs last week, U.S. stock markets lost over $8 trillion in value in just a few days. Spooked investors fled to safe-haven assets—primarily U.S. Treasuries—pushing yields lower across the board.

Ironically, while previous attempts by Trump to influence interest rates fell flat, his tariff strategy had the unintended effect of nudging long-term rates down, including the 10-year CMT. That’s good news for HECM lending.

Here’s how the ripple effect played out: The tariffs heightened economic uncertainty and stoked fears of a renewed trade war, particularly with China.

Investor confidence in global growth faltered, sparking a “flight to safety” as capital flowed into Treasury bonds.

Increased demand for Treasuries drove yields down—including the key 10-year rate tied to HECM loan calculations.

Lower interest rates translate to higher borrowing limits for reverse mortgage borrowers.

These lower rates may also benefit the federal government, which is expected to refinance $9.2 trillion in debt by June—$6 trillion of which must be repaid or refinanced in the coming months.

Signs of Hope Ahead. Despite current hurdles, many in the HECM space remain hopeful. The aging U.S. population and growing demand for retirement income solutions suggest long-term growth potential.

To seize that opportunity, however, the industry must navigate today’s challenges. Proprietary or “jumbo” reverse mortgages are gaining traction, especially among affluent homeowners seeking alternatives to FHA-backed products. At the same time, tech-driven improvements are making the reverse mortgage process smoother and more in line with traditional mortgage experiences.

Perhaps most promising is the integration of reverse mortgages into holistic retirement planning. As financial advisors become more educated and open to including HECMs in broader financial strategies, reverse mortgage professionals have a chance to reshape public perception and solidify their role as trusted retirement partners.

Final Thoughts. In 2025, success in the reverse mortgage industry requires more than resilience—it calls for innovation, education, and strategic thinking. While the path ahead is far from easy, the building blocks for long-term growth are in place. With greater clarity on regulations and continued easing of interest rates, the industry’s cautious optimism might just pay off.

By Shannon Hicks | April 8, 2025 | No Comments. Call or email Scott Underwood (205) 908-2993 or Reverse Mortgage Alabama.com. We cover Alabama, Mississippi, Georgia, Mississippi! I am the South’s Reverse Mortgage Guy and can make house calls to many places. We are willing to make house calls to areas such as Vestavia, Hoover, Chelsea, Trussville, Muscle Shoals, Huntsville, Anniston, Gadsden, Tuscaloosa, Alabama and more!