Fannie Mae announced yesterday that it will no longer buy CMT based reverse mortgages beginning September 1, 2009. This means that CMT based reverse mortgages are therefore much less likely to be offered starting on that date. While on the surface this might look problematic, most lenders and borrowers are already using LIBOR based products, which currently have lower interest rates than the CMT based products.
Fannie Mae said the reasoning behind the discontinuation of CMTs was to help standardize and simplify the HECM product offerings, build liquidity for the product, and move the market towards securitization. However, another likely factor is that the CMT is based on the US treasury bond, which has been plummeting in value recently due to the recession. The LIBOR, on the other hand, is based on the London Inter-Bank Offered Rate, which is an international index. As a result, it is arguably a more stable rate in the current economic climate, dependent on the international situation as opposed to only on the US.
Lenders will be able to continue to obtain pricing and commitments for CMT based HECMs from Fannie Mae until August 31, 2009.