Expected Rates
HECM loans use the "expected interest rate" to look up the principal limit factor.
HECM ARM
For HECM ARM transactions, the expected rate is equal to the sum of the margin plus the weekly average yield for the 10-yr CMT index. This rate is published at the Federal Reserve Board Statistical Release H.15.
Calculation of Expected Index (HECM ARM Loans Only)
The expected index rate is calculated based on the prior week's average rate.
Example Below we have compiled data as of September 2025.
| Date | 10 Yr |
|---|---|
| 09/02/2025 | 4.28 |
| 09/03/2025 | 4.22 |
| 09/04/2025 | 4.17 |
| 09/05/2025 | 4.10 |
| 09/08/2025 | 4.05 |
| 09/09/2025 | 4.08 |
| 09/10/2025 | 4.04 |
Loan Application Date: 9/8/2025
The expected index from the prior week would be based on all published days. Note that, 09/01/2025 was a holiday (Labor Day), so there was no expected index published on this day.
Therefore, the expected index can be calculated as follows:
(4.28 + 4.22 + 4.17 + 4.10)/4 = 4.19%
The resulting expected index is 4.19%.
The expected index always occurs one week in arrears.
Expected Rate Lock (HECM ARM Loans Only)
On HECM loans, the expected rate can be locked for 120 days plus an additional 120 day extension.
If the expected rate lock has not been extended, then the loan calculations will revert to the latest expected rates.
Expected Index Float Down (HECM ARM Loans Only)
The expected index may also be "floated down" to the lowest expected index between the date of application and the date of closing.
ReversePilot makes it easy to see the expected rate float down, and the optimal expected rate to be used for the loan:
This is best illustrated through an example.
Example:
| Date | |
|---|---|
| Application | 4/23/2025 |
| Closing | 6/4/2025 |
Between these weeks, various expected indexes were available: 4.38%, 4.23%, 4.34%, 4.47%, 4.50%, and 4.44%
ReversePilot will use the lowest available expected index between the application date and closing date to calculate the loan's principal limit factor.
HECM Fixed
For HECM fixed rate transactions, the note rate and the expected rate are the same. This is used for the principal limit factor lookup.