HECM CMT 150 Eliminated and LIBOR HECM Reverse Mortgages pushed
FNMA announced drastic increases in HECM Reverse Mortgage rates over the last few days. National lenders such as Everbank Reverse Mortgage (MetLife), Sun West Mortgage, and J B Nutter have all eliminated the Treasury based 150 margin reverse mortgages. All loans must close and fund by the end of August to maintain the current rates. In addition to eliminating the HECM CMT 150 (The HUD Insured Reverse Mortgage tied to the Constant Maturity Treasury with a 1.5% Margin) pricing to mortgage lenders and brokers was also greatly worsened on the 175 Marin and 200 Margin Treasury Products as well.
This move seems to be an attempt to push lenders, brokers and borrowers into Reverse Mortgages based on the more lucrative LIBOR Index. With treasury rates currently under 4% FNMA will make much greater returns by basing the mortgages on the LIBOR Index. One has to wonder if this move isn’t partially based on their current loss in value on the stock market - make more money on the loans that can’t default… Reverse Mortgages.
Other factors have to include the surge of reverse mortgage refinances that are expected to take place when the new higher HUD limits go into effect. Almost any current reverse mortgage holder with a home worth more than $400,000 will receive significant additional funds under the new loans limits. I think FNMA is hoping to force this surge of refinancing seniors into higher margins and/or LIBOR based products to increase profits over the long run. Once the initial surge is over I wouldn’t be surprised to see lower margins return to the market.