Financial Freedom has officially released their first LIBOR based HECM product. LLS “announced” that they were the first to release a LIBOR product about a week ago. Financial Freedom is calling the product the HECM Monthly Libor 65 which is related to the margin on the product.
“We are focused on continually developing new products that provide seniors with access to a range of financial options to best meet their needs,” said Michelle Minier, CEO of Financial Freedom. “HECM Monthly LIBOR 65 joins our existing line of HECM products resulting in the broadest HECM product suite in the reverse mortgage industry.” Financial Freedom has been busy lately releasing their HECM Fixed product as well as announcing that they are continuing to offer the HECM 100 product.
By using the LIBOR index the borrower benefits in several ways. Over the past 15 years the LIBOR + .65% has averaged .35% lower than the CMT + 1.00%. In fact, during that 15 year period there has never been a rolling 5 year period where the LIBOR + .65% was not the lower rate. Using the LIBOR index will result in lower interest costs over time to the borrower. Currently, the HECM LIBOR 65 has a higher expected rate than the HECM 100 which results in a principal limit that is 1%-5% lower, depending on the borrower’s age. The borrower will receive slightly less money with the HECM LIBOR 65 than the HECM 100, but for a borrower that is looking to get a specific amount of money while minimizing interest costs and preserving more equity, this is the more suitable product.
A few more details about the product:
- Initial Rate is based on the One-Month LIBOR index (as published in the Wall Street Journal on the first business day of each week) plus the interest-rate margin.
- Expected Rate is based on the weekly average value of the Ten-Year Interest Rate Swap (as published in the Federal Reserve Statistical Release H.15 on the first business day of
each week) plus the interest-rate margin.
It looks like there is only a monthly option on the product to begin with but I’m sure we will see an annual LIBOR based HECM product in the near future.