Reverse Mortgage Rates – December, 23 2008

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.

imageThis 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.

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

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Reverse Mortgage Rate Updates are brought to you by Jerry Wagner & Ibis Reverse Mortgage Software – The Industry Standard Since 1995. This is not just a slogan — six of the top 10 reverse mortgage originators plus NRMLA and the AARP use Ibis Software for their websites, retail and wholesale businesses.

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  • Is it true that HUD has a set a floor of 5.5% in determining the initial principal amount? A few people have told me that they never have heard about a floor.

    Also, I assume the weekly rates that you give us are the rates that are we are charged (each month in my case). Hpwever, your November 25th posting you indicated that a big drop in the 10 year would result in a $5000+ increase in benefits. But each week you say that the falling rates are a negative.

    I am not a professional reverse mortgage specialst so I am somewht confused.

    Thank you in advance for a response.

    Warren Mennig

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