LIBOR transition resources available from GSEs
The Federal Housing Finance Agency (FHFA) Thursday announced Fannie Mae and Freddie Mac have new websites providing resources to lenders and investors as the government-sponsored enterprises (GSEs) transition away from the London Inter-bank Offered Rate (LIBOR). LIBOR is set to stop publishing after 2021 and the Secured Overnight Financing Rate (SOFR) has been identified as its alternative.
The GSEs' LIBOR websites include transition timelines, a playbook detailing key transition milestones and recommended actions for stakeholders to consider, and FAQs.
As part of the LIBOR transition, the FHFA in February released an update on GSEs' development of an adjustable-rate mortgage (ARM) product that will be indexed to the SOFR. Of note from that release:
- new language will be required for single-family uniform ARM instruments closed on or after June 1, 2020;
- all LIBOR-based single-family and multifamily ARMs must have loan application dates on or before Sept. 30, 2020 to be eligible for acquisition; and,
- acquisitions of single-family and multifamily LIBOR ARMs will cease on or before Dec. 31, 2020.
Some members of the Federal Reserve have warned of financial stability risks and the Treasury Department in October proposed a rule to smooth the transition. In addition, former Comptroller of the Currency Joseph Otting previously indicated financial regulators were considering alternatives to LIBOR that would be suitable for loans as some banks warned that SOFR could hurt their finances during economic downturns.
NAFCU Chief Economist and Vice President of Research Curt Long has an article focused on what credit unions should know about the LIBOR transition, including the adoption of the SOFR, available in The NAFCU Journal.
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