Over the course of 22 years and $95 billion of HECM loans insured by the Federal Housing Administration, the U.S. has become the world’s most developed reverse mortgage market, according to research by Cantor Fitzgerald.

Over the last few years, the program has gone through several different transformations to make the product more sustainable in the long term. These include the transition away from Fannie Mae as the main investor of reverse mortgages, to the development of Ginnie Mae’s HMBS program, and changes made to protect all market participants from potential abuse.

“At times, it seems that the new terms may actually decrease loan demand but the overseeing government agencies are acutely aware of avoiding potential loan abuse,” said the report. “These agencies would rather risk slowing market growth while ensuring the United States reverse mortgage program will continue to remain a viable option for all participants versus pushing for rapid market growth.”

This slow and steady regulation approach taken by the government, “ultimately attracts more borrowers and investors and has also become a standard for other countries’ reverse mortgage markets,” said Cantor.

Since the first GNMA security issued in 2009, $7 billion of HMBS product has been issued by eight different Wall Street broker-dealers. “Today, we see $500-800 million in HMBS pools sold in competitive street auctions every month. U.S. reverse mortgages have become an accepted finance tool for borrowers, lenders and investors.”

Despite more demand from investors, industry volume still managed to fall 35% in 2010 and penetration levels remain around 1-2% of the overall size of the marketplace. Still, Cantor expects growth to come back. ”Even without any further product market penetration, market growth simply due an increasing target market size will drive supply tremendously,” said the report.

Today, seniors over the age of 62 are holding $3.3 trillion in home equity according to RiskSpan. Over the next 10-20 years, even with modest to flat home price appreciation, Cantor estimates the value could double due to the aging baby boomer demographic.

“Consider this total home equity value with the fact that since 1989 less than $100 billion FHA-approved reverse mortgage loans have even been originated, and one can see that the potential market growth is enormous.”