Reverse Mortgage Rates – November, 25 2008

November 25th, 2008 | by admin Published in News, Rates, Reverse Mortgage | 4 Comments

We will likely never see a week like this again. 10-year rates plummeted. In the colored tables below you can see the changes in benefits for the average HECM borrower (a 73-year old in a $250,000 home). A Treasury HECM+200 will give $5,811 more tomorrow. A HECM+175 will give $197 less because the benefits were at the cap last week, and the new lower rates increase the service fee set-aside.

This week, all Treasury-based HECM’s with a margin of +218 or less will pay the HECM maximum benefits. Ditto for LIBOR-based HECM’s with margins of +190 or less. Using these margins, the initial note rate on a LIBOR HECM would be 15 bp more than that on a Treasury HECM. The rates as of 11/25/08 are:

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John S

Would like to see the cap lowered. How about 5.0 instead of 5.5

RickM

They have to stop somewhere otherwise we begin to chew into the MIP fund too far too fast.

Raymond Denton

The MIP fund is now in the billions ... we can afford to eat into it a little bit. In fact, it's far too big and the MI for HECM's should be lowered accordingly.

John S

My original topic is lowering the cap (5.50) to calculate the principal limit not the 2% UFMIP.The MIP fund will not be reduced anytime soon because H4H and FHA Secure redefaults will dip into the fund.

Question_Mark

Mr. Denton,

Who knows if the MI is overfunded? Can you provide your acturial studies to the industry? What assumptions are you using? In this environment where home prices are still dropping in areas where over 50% of all HECMs were placed, are your assumptions reasonable? The vast majority of HECMs still outstanding were funded in the last five years. What evidence can you offer that when home prices are still falling the MI fund is actually overfunded?

You made the claims. Please offer the evidence.

Question_Mark

John S.,

Rick M. is right. Everything about the size of HECMs potentially affects the MI fund. If there should be more proceeds offered at lower expected interest rates, then it only seems reasonable that FHA charge more for MI. While your suggestion is interesting, it also affects the MI Fund calculations and not for the better.

What is true of the FHA MI is that the risk to the lenders is passed to FHA. The greater the size of the loan, not only does the possible risk increase but so does it size.

Be careful what you wish for.

Reverse Mortgage Rates – November, 25 2008

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