Fannie Mae Discontinues CMT Based Reverse Mortgages

image Fannie Mae announced that effective September 1, 2009, they will discontinue offering commitments to purchase CMT-indexed HECMs.  The government sponsored entity will continue to offer commitments to purchase monthly adjustable rate LIBOR based HECMs and fixed rate HECMs.

According to the announcement, FNMA’s decision to discontinue CMT based reverse mortgages is intended to help standardize and simplify HECM product offerings, build liquidity for the product, and encourage a market shift toward securitization.

Most originators that I’ve spoken to are closing almost all LIBOR based products because the pricing is so much better.  A quick look at today’s rate sheets show LIBOR based HECM’s are priced about .50% better in rate compared to CMT based products.


Lenders will be able to obtain pricing and commitments for CMT based HECMs in eCommitting until August 31, 2009.

Changes to Home Equity Conversion Mortgage Index Options

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  • Blows my mind – yet confirms change is a constant.

    The CMT made sense when we were small, but the LIBOR makes more sense today; because of the lack of a secondary market.

    I’m bummed though – because the Reverse Mortgage I’ve grown up with will soon be gone.

  • It is getting tough out there! The 10 year swap at 6.54% this week from 6.09% last week. Where are we heading?
    I have a 75 y.o. customer at 625K value that put off signing app. last week and is getting over $19,000.00 less this week.
    I agree with Raymond but I remember my customers with the CMT 100 and that was only two years ago!

  • Rate increases that are going in the upcoming year or two is going to hurt our industry more than most know…in my opinion.
    I don’t believe most realize the impact because all the newbies have had rates so low for so long. The benefit to the customer is being reduced quickly and with rates rising will become less and less. We will always have those who don’t have an option but those on the fence that don’t have to do it won’t because the benefit won’t be there.

  • Very simple. Lifestyles of the Rich and Famous made us all wannabes. We live above our means. A socialist-learning government gets elected and feels sorry for us. They bail us out with money they don’t have, to the tune of $1.46 for every $1.00 they collects from us. They print money and borrow exorbitantly to make up the difference. The people are appeased. Temporarily.

    The money does what money does: chase fewer and fewer goods and services. The yield curve steepens. Oil goes up in price. Soon, everything goes up in price (see ya in 12 – 18 months in a very different world). Rates increase further to “fight the inflation.”

    Principal Limits plunge. Cut-throat competition ensues — I had a competitor reduce their Origination Fee to $0 AND, when I matched it (for the back end), they reduced attorney’s fees by $800.

    There will be far fewer of us next year and most likely only desperate seniors will even consider our product. The shame and sadness of it all — there will almost certainly be growth among the number of desperate seniors, both financial desperation and desperation to return to an economy that could sustain itself and which required sacrifices, the same economy our valued seniors sacrificed and died for.

  • Why all the doom and gloom? I look forward to a time when the LIBOR returns to normal levels and margins are reduced as competition in the secondary market ensues. New products are on the horizon and let’s not forget how many people are reaching retirement age every day. The demand will create a market and the products will follow.

  • I am unsure as to why they would move away from the CMT and use a international interest rate instead. Is this the beginning of the world economy and the end of confidence in the U.S. Treasury?

  • I would love to be positive but its reality not doom and gloom. Sure with time more investors will mean lower margins. Although, the rates are going to be much higher. Therefore, a lower margin doesn’t mean much when rates are 8-9-10% if not higher. It all comes down to the benefit to the borrower. Today a 62 yr old senior with a 625,500 value and expected rate of 6.5% gets 300K and costs of 21K. Just 2% higher(which is conservative) at 8.5% expected rate this same senior gets 190K and the same costs of 21K. Sure there will be more seniors because of the baby boom. Although, the amount of seniors that will qualify or believe its a benefit is going to be much less than we have experienced over the past 6-7 years. Again as I said in my earlier comments those who have been in the industry for longer than 6-7 years realize this. Those who have been around 7 years or less which is most of the industry don’t realize the impact of the interest rates.
    Mark Draper and Mike Manfredi I guarantee have only been around during the good years with rates being low. Otherwise, they would realize the seriousness of the rates to our seniors.

  • Downside is some folks absolutely insisted on Annual Treasury because of the conservative nature of the caps. Yes, lots less money, but those in fear of potential 13% rates wouldn’t listen to the typical “short-term” nature of the increases.

  • Ultimately this is exactly what Fannie Mae needed to do, and I had hoped that they would do. No other investment bank or potential purchaser of whole loans or securities has any interest in CMT based products. This move is intended to help stimulate more investment entrants into this space and will in fact do just that.

    I don’t think it will drive them in today, but it will bring them in much sooner than if potential new entrants had to compete with, or deal with, CMT based products.

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