Moving to the CMT Index - Your Resource Guide

Moving to the CMT Index - Your Resource Guide

Moving to the CMT Index Your Resource Guide for a Successful Transition

Helping You Prepare for the Transition

We’ve developed a variety of resources to help you, your team and your borrowers prepare for the transition. In addition to our training calendar, RMF will communicate important transition updates via Lender Alerts, FAQs for borrowers and information guides like this to help you stay organized. Please make sure you refer to the partner site, https://partners.reversefunding.com/ for additional resources and tools as well. Your Account Executive and Relationship Managers are invaluable resources, please reach out to them for any kind of support such as transition pipeline meetings, trainings or any general questions. They’ll help you map out a transition plan that works for your business.

“ In late September 2020, the federal agency Ginnie Mae (GNMA), which guarantees Home Equity Conversion Mortgage (HECM) loans in the secondary market, announced to the reverse mortgage industry that it will no longer allow LIBOR as an index on HECM loans effective December 2020. This guide covers the answers to many of your questions and concerns such as: n What is the implementation timeline and last days to close loans on LIBOR paper? n Will change to CMT impact available proceeds to borrowers? n How does this transition impact pricing? n What happens to borrowers whose loans did not close before the cutoff?

To learn more, call RMF today at 877.820.5314 | 2

Table of Contents

Background ................................................................................................................................................................... 4

The LIBOR to CMT Transition Timeline ..................................................................................................... 5

Wholesale Partners ...................................................................................................................................... 6

Principal Agent Partners ............................................................................................................................ 9

Correspondent Partners ............................................................................................................................ 12

HECMMath: Understanding the CMT Index .................................................................................................. 15

Comparing the CMT and LIBOR Today .............................................................................................................. 17

CMT Loan Pricing ..................................................................................................................................................... 19

How to Redisclose LIBOR Loans in Tango ......................................................................................................... 20

Frequently Asked Questions .................................................................................................................................. 21

Additional Resources Available to You ................................................................................................................ 22

Appendix A: “Adjustable Rate Mortgage—Possible Discontinuation of LIBOR”—Disclosure ............. 23

Appendix B: “New Index Transition Notice”—Disclosure .............................................................................. 24

Appendix C: “ARM Index Change LIBOR to CMT Disclosure Cover Sheet” ........................................ 25

Appendix D: RMF’S LIBOR to CMT Consumer Info Brochure ............................................................... 26

Appendix E: RMF’s HECMMax 5 ................................................................................................................... 30

To learn more, call RMF today at 877.820.5314 | 3

Background

In late September 2020, the federal agency Ginnie Mae (GNMA), which guaranties Home Equity Conversion Mortgage (HECM) loans in the secondary market, announced to the reverse mortgage industry that it will no longer allow LIBOR as an index on HECM loans effective December 2020. The Federal Housing Administration (FHA), will only insure HECMs based on either the Constant Maturity Treasury (CMT) or LIBOR. As a result, the industry will transition to CMT immediately. What is the CMT index? It’s an index published by the Federal Reserve board based on the monthly average yield of a range of Treasury securities, all adjusted to the equivalent of a one-year maturity. Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve. It’s used to set the cost of adjustable rate mortgages. Where are CMT rates published? The Index is published in the Federal Reserve Board’s >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32

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