Fannie Mae announced June 1, 2009 that effective September 1, 2009, they will no longer offer reverse mortgages based on the CMT or Constant Maturity Treasury. They will continue to offer the LIBOR (London Interbank Offered Rate) index.
The LIBOR index has seen a steady increase in popularity since it’s release. Margins for both indices have been on the rise, however margins for the CMT are higher that the LIBOR. Because of this, the LIBOR program offers borrowers greater borrowing power than the CMT, which explains it’s growth. According to Fannie Mae, the decision to eliminate the CMT was done with intent to standardize the product offering (simplifies it for the consumer), build liquidity for the product and encourage securitization of reverse mortgages. The LIBOR is a much more attractive index for securitization.
Our Reverse Mortgage Rates and Programs page no longer tracks rates for the CMT as part of the process of fazing it out. In fact, since the LIBOR index was introduced, most of our clients have chosen the LIBOR index over the CMT mainly for the additional borrowing power, but also for the lower margins.
It’s important to note that there is a fixed rate option available also for reverse mortgages. The rate today is 5.56%, which allows even greater borrowing power than the LIBOR product currently. The fixed rate does have a few quarks though, so it’s important to discuss all options with a qualified reverse mortgage advisor.