The 10-year Constant Maturity Treasury and LIBOR swap rates keep falling to record lows. We’re in territory where the Principal Limit is maxed out, and the SFSA and tenure conversion factors are the only things moving with rates. Lower rates mean less money since lower rates give higher SFSA’s. This week a Treasury HECM+225 gives $291 more than a HECM+175 (all from a lower SFSA). And as rates fall, benefits fall because the SFSA goes up. Here is this week’s benefits versus last week’s.

This week, all Treasury-based HECM’s with a margin of +330 or less will pay the HECM maximum benefits. Ditto for LIBOR-based HECM’s with margins of +307 or less.

DANGER – DANGER – DANGER –  a 3.10% margin annually-adjusting HECM now gives higher benefits than a monthly-adjusting HECM. For example, for the average HECM borrower, an annual 3.10% HECM gives $445 more than a monthly 2.25% HECM. Do not let your borrowers think this is a preferred option — they will pay much more interest over the life of the loan — far offsetting any extra benefit they may receive.

Here are the rates as of 12/23/08:

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