What HECM pros should know about the CMT rate

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What reverse mortgage pros need to know about the Constant Maturity Treasury rate

The Constant Maturity Treasury (CMT) rate determines the mortgage interest rates associated with adjustable-rate traditional and reverse mortgages. Here’s how the CMT rate is actually calculated.

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James E. Veale, MBT June 21, 2022 at 7:23 am

The following comment is applicable to adjustable rate HECMs.

One should keep in mind that both the margin and the 10 year rate applicable to a HECM do not change. The sum of the margin and the applicable ten year rate is known as the expected rate which again does NOT change throughout the life of the HECM. Not only is the expected rate used in determining PLFs but also term payments, tenure payments, LESAs, and repair “set asides.”

The interest rates that change monthly or annually when computing monthly interest accruals, the amortization of set asides, and growth in the HECM LOC are based on the monthly and annual CMT rates indexes plus the unchanging margin.

While both annual and monthly CMT index rates are currently lower than the 10 year CMT,. Historically that has not always been the case..

Shannon Hicks June 21, 2022 at 9:14 am

Excellent points, Jim!


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