GSE to develop new adjustable-rate mortgage product
As the London Interbank Offered Rate (LIBOR) is expected to no longer publish after 2021, Fannie Mae is set to develop an adjustable-rate mortgage (ARM) product that will be indexed to the Secured Overnight Financing Rate (SOFR).
The Alternative Reference Rates Committee – a group convened by the Federal Reserve – published a white paper last week that is "intended to help illustrate a model of how market participants could use the [SOFR] in consumer closed-end, residential [ARM] products."
In an announcement, Fannie Mae noted the benefits of using SOFR to index and said it will develop the ARM product "after systems and processes have been put in place to accommodate the new index, and will provide reasonable notice in advance of the offering to [Fannie Mae's] lenders." It will release an updated Selling Guide once the new product is developed.
NAFCU will monitor Fannie Mae's efforts and keep credit unions updated on how this new SOFR-indexed product could impact lending.
Get daily updates.
Subscribe to NAFCU today.