Colli Real Estate

In 2003 what did FHA Reverse Mortgages pay in interest on unused available cash?

In 03 the economy came back like gangbusters. Did money that seniors had in reverse mortgage equity reserves also benefit from rapidly rising rates? Did those rates go up and by how much? Or did they even go down?

Bag-Ten,

The reverse mortgage equity reserves or lines of credits grow at the same rate as the interest being charged against the borrower including the FHA mortgage insurance payment of .5% a year. So to figure out what someones line of credit growth rate was at any time you have to know what the current interest rate is being charged. FHA reverse mortgage interest rates are tied to the 1 year Treasury Bill plus 1.5%. In 03 the average T-Bill was around 1.25%. So to figure out what the return was in 03 for a reverse mortgage line of credit you would figure 1.25%(T-Bill) + 1.5%(Interest rate) + .5 (FHA mortgage Insurance) = 3.25% Growth rate for the Line of Credit. This return fluctuates accordingly so as the rate goes up it goes up or just the opposite. For example today that growth rate is 7.22%.

You can look at the history of the T-Bill here and calculate what the return was at any time with the above formula.

http://www.erate.com/1_year_t-bill_index_adjustable_rate_mortgage_arm.htm

I hope that helps. This is all I specialize in so if you have any other questions please feel free to contact me.

Thanks,
Brandon

bburns@griffinloans.com

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