Reverse Mortgage rate based on...... ?

[Cedrus]

Oregon

We will do a reverse mortgage shortly and the broker told us that R/M rates are not based on anything. Not the 10 year treasury or LIBOR or 30 year rates. Or anything else.

Apparently the lender can quote a rate as they see fit.

Sound right?

[FlyingRon]

There's really no difference than with a regular mortgage. If it's a fixed rate, it's fixed at whatever the lender thinks they can get/need based on market conditions. If it's variable, the system for adjusting the rate (typically based on some public index) is part of the loan terms but the base rate (where it starts) again is up to the lender.

[seniorjudge]

Cedrus...Let us know how this turns out.

Now, I will tell you all I know about reverse mortgages: Make sure you talk to three or four different lenders before you sign anything. If they can't give you a copy of EVERYTHING you are supposed to sign before you sign it, go somewhere else. Make sure you understand every single word before you sign anything.

reverse mortgage calculator

Google this and run a few scenarios.


Good luck!

[HUD-1]

If it is a HUD/FHA HECM ARM:

SUMMARY: This final rule adds: The one-year London Interbank Offered
Rate (LIBOR) as an acceptable index for the HUD-insured one-, 3-, 5-,
7-, and 10-year Adjustable Rate Mortgage (ARM) products, and the one-
month Constant Maturity Treasury (CMT), the one-month LIBOR, and the
one-year (12-month) LIBOR as acceptable indices to adjust interest
rates on the HUD-insured Home Equity Conversion Mortgage (HECM). Under
current regulations, only the weekly average yield of U.S. Treasury
securities, adjusted to a constant maturity of one year (commonly
referred to as the one-year CMT), may be used to adjust interest rates
on HUD-insured ARMs and HECMs. This final rule follows a June 19, 2006,
proposed rule and includes HECMs in response to public comment on the
June 19, 2006, proposed rule.

DATES: Effective Date: August 20, 2007.

[seniorjudge]

HUD-1: Would you please give me a cite or link for that?

Thanks.

[HUD-1]

Full info for HECM ARMs can be found in HUD Mortgagee Letter 2007-13.

Info on HECM Fixed Rate can be found in ML 2008-8.

[url=http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/]Mortgagee Letters - HUD[/url]

[Cedrus]

HUD-1

I'm sorry. I should have said this is a HECM Fixed. Latest quote is 5.68%.

I will look at the info you posted for fixed rate.

Thank you

[Cedrus]

Well, we checked out a few lenders and settled on a local broker who deals with the Senior Lending Network (Robert Wagner)/ World Financial Corp. HUD HECM loan.

5.68% is locked in until 31 Dec and the Good Faith estimate statement looks OK. Closing is set for 4 Dec.