Reverse Mortgage Rates – December, 16 2008

The 10-year Constant Maturity Treasury rate fell to a record low today — 2.54%. 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 $273 more than a HECM+175 (all from a lower SFSA).

This week, all Treasury-based HECM’s with a margin of +289 or less will pay the HECM maximum benefits. Ditto for LIBOR-based HECM’s with margins of +262 or less.

An anomaly is occurring. A 3.10% margin annually-adjusting HECM now gives higher tenure income than a monthly-adjusting HECM. The initial NPL is a couple of notches lower on an annual HECM, but it’s relatively high Expected Rate gives a high tenure conversion factor. Think about tenure income calculations like a car loan — higher rates make for higher payments. 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 monthly income they may receive.  The rates as of 12/16/08:

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  • Good advice for the majority of borrowers, but taking the higher tenure amount might make sense if the person doesn’t have any heirs to leave her assets to. It’s all about each individual’s situation, right?

  • can not belive questions of SFSA or NPL and sally what if you need money to pay off a high mortgage balance. I wish some of these mortgage brokers go back to thier sub prime days. And the brokers worry about heirs before the senior should also get out.

  • To mrreverse – re-read my comment, then re-read your own response, because I can’t figure out what you’re trying to say when you don’t use punctuation marks or write clearly.

    I was only talking about tenure payments – not paying off a high mortgage balance.

    My goal is not to put seniors out on the street; it’s to provide the best product for each senior. My point was that if a senior doesn’t care about the mounting interest on the loan because there is no one to leave her assets to, she may prefer to take as much money per month for as long as she lives in the house (tenure).

    FYI – I never came from the forward business.

  • mrreverse:

    You may not believe questions about SFSA or NPL (we were simply asking what the acronyms stood for, not what the items were or how they figure into a reverse mortgage), but I can’t believe how atrocious your grammar and diction are while you’re trying to build a client base among a generation whose grammar and diction are far superior to their successors. Perhaps you should submit yourself to some grammar and diction lessons from your next several customers. They would probably be delighted to be able to offer you something in return for your service.

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