If you have a Reverse Mortgage or are thinking of getting one then Reverse Mortgage Changes are
something you keep an eye on.

Every year around the end of September and again in December FHA/HUD likes to surprise the HECM
Reverse Mortgage industry with changes. Sometimes the reverse mortgage changes are small and
sometimes they are pretty dramatic. The year 2020 was one of those more dramatic years.
For over a decade adjustable-rate Reverse Mortgages have been linked to Libor (London Inter-Bank
Offered Rate) this is an index that had been used y major global banks as they lend money to each other.

A few years ago it was discovered that there has been regular manipulation of this rate making it
unreliable. So as a result, FHA/HUD decided to move away from it toward the end of 2021.
The big Reverse Mortgage Change this year was that HUD decided to fast track the change by a year. As
of December 31, 2020, HUD will no longer endorse mortgages linked to LIBOR. This surprise sent the
industry into a frenzy for a few weeks as banks and lenders worked to switch to a temporary solution
called the CMT (Constant Maturity Rate). The CMT is determined by the U.S. Treasury and the Federal

What are the Pros and Cons of these changes?

 • The CMT in general is a lower rate and a little more consistent than the LIBOR.
 • The CMT tends to follow the US economy and Fed Funds rate more closely.

 • Initially, the CMT only offered a rate that adjusted monthly, had no annual caps, and a 10%
lifetime Cap.
 • The Libor offered a rate that adjusted only once a year, had 2% annual caps and 5% lifetime
 • Fortunately, banks have since released updated versions of the CMT which also adjust only once
a year and have the 2% and 5% Caps.

In the Short-run this was a big surprise to the industry that had to grapple with the surprise. In the long
run, we’re adjusting pretty quickly and this reverse mortgage change will end up being a great
improvement to Reverse Mortgages and the future of the industry.

Additional information:

Going along with this article is a video on Youtube that illustrates the differences of the Traditional Fixed Rate Reverse Mortgage and the Growth Line of Credit Reverse Mortgage. You can also watch the full version of this informational video on Youtube or our Website.

When you or someone you care about is ready to talk about your Reverse Mortgage options. give us a call. We’re happy to work up your scenarios and show you how we can make your life better with this amazing product.

Trevor Carlson

President – Reverse Mortgage Specialist

Heritage Reverse Mortgage




Heritage NMLS #1497455 Trevor’s NMLS #: 267962

1060 South Main Street Bldg. A Suite 101B

St George Utah 84770