Fannie Mae, the reverse mortgage industry’s dominant investor, announced today that it will stop committing to buy home equity conversion mortgages priced off of the Constant Maturity Treasury index effective Sept. 1.
“Fannie Mae’s decision to discontinue offering commitments to purchase CMT-indexed HECMs is intended to help standardize and simplify HECM product offerings, build liquidity for the product, and encourage a market shift toward securitization,” said Senior Vice President Michael A. Quinn, single-family risk officer, in announcement 09-16.
The announcement states lenders may obtain pricing and continue to commit CMT-indexed HECMs until Aug. 31. There is no specific deadline for delivering CMT loans to Fannie Mae.
Fannie Mae’s recent pricing changes for HECMs have caused lenders to raise margins to a point where the CMT-based loans were becoming obsolete, brokers say. Based on HECM lending formulas, borrowers have been receiving greater proceeds with LIBOR-indexed loans lately, and more are also locking in low fixed rates.
