LIBOR Sunsetting

Your assistance is needed!  We need to make sure we’re properly boarding newly originated ARM products no longer tied to the LIBOR index. Your feedback as requested below will be greatly appreciated.

GSE Guidance: 

The LIBOR (London Interbank Offered Rate) is set to be discontinued at the end of 2021. LIBOR has been the base index for most variable-rate loans, notes, interest-rate swaps and other instruments for many years. In an effort to be prepared for the sunset of the LIBOR index, the GSE’s have issued some recent announcements regarding changes to their ARM notes and riders.

The GSE’s have announced uniform ARM Notes and Riders revisions to reflect the index fallback language recommended by the Alternate Reference Rates Committee (ARRC). 

FHLMC advised that Sellers must use the updated Uniform Instruments for ARMs with Note Dates on or after June 1, 2020, but had the option of using them immediately. The revised uniform ARM Notes and Riders are available on the FHLMC Uniform Instruments web page for Sellers to use.  FHLMC also announced that they are revising the Lifetime Floor language in their ARM Notes and Riders. Instead of stating that the interest rate will never be “less than the Margin,” the revised ARM Notes and Riders state that the interest rate will never be “less than ____.%” As a result, Sellers will need to complete this new Lifetime Floor field in the revised ARM Notes and Riders.

FNMA announced their intention to offer ARM product(s) based on the ARRC’s recommendation of the Secured Overnight Financing Rate (SOFR) for newly originated loans.

Required Information for Boarding: To help ensure we’re properly boarding new ARM products, we’re requesting assistance from you, our Client partners, to provide us with information on what ARM Products you’ll be originating. We’re requesting that you complete the table informing us which product types you’ll be originating and provide this completed table back to Special Products at specprclrel@cenlar.com.  We’re requesting that this updated table be provided back by 4/17/20.