The Senior Lending Network announced earlier this week that it was moving all of its products to LIBOR starting on Monday, March 16, 2009. According to the notice sent to brokers, SLN believes the pricing on CMT products will further diminish, therefore making the need for this product insignificant in today’s marketplace.
In the email, they compare the LIBOR 275 to a CMT 300 which shows that the consumer is receiving a similar principal limit and a lower margin. See table:
| Product | CMT 300 | LIBOR 275 |
| Home Value | $440,000 | $440,000 |
| Interest Rate | 3.72% | 3.25% |
| Available Principal Limit | $268,332 | $268, 325 |
| *As of March 10, 2009 |
The Senior Lending Network was the first wholesaler to offer LIBOR based products and they’ve been a big supporter of it due to the secondary markets preference of LIBOR. As far as I know, they’re the first wholesaler to move back to strictly LIBOR based products, well see if anyone else follows suit.
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Why would you choose to put yourself in a smaller box in a terrible, very unstable market?
Mr. Peskin,
You have taken yet another bold step but this time in a very volatile market. It would be interesting to hear how your risk management team analyzed this move. I’m sure many of us will be following suit.
It is hard to believe that margins are the only the factor to consider. But where is the spread between the LIBOR and the CMT going over this year and for the next seven years to come? Time will tell.
In these market conditions the more options the better. I would be curious to have a 20 yr history comparision between the CMT and LIBOR index?
Tell me what the Dutch bank that owns SLN wants and I’ll tell you what they offer. Not a big mystery. Its the Golden Rule, the person (bank) with the gold makes the rules.
This is strictly a profit-based move for the company, NOT the senior. CMT margins have diminshed, but so have the LIBOR ones. CMT continues to be a more steady and less disruptive rate for the senior.
Cant believe no one got this…Fannie cut them off.