Capital Assets Weekly Comments

Mitchell Redd
Adjustable Rate Mortgages: The Change From LIBOR to SOFR

Subsequent to the distribution of these comments yesterday, the Federal Housing Finance Agency (FHFA) issued guidance related to the transition away from LIBOR. Part of this announcement included the planned ineligibility for sale of CMT-indexed ARMs to Fannie Mae and Freddie Mac starting in 2021, with a specific date to be determined later. While it looks like CMT ARMs will remain eligible for a year or more, a transition from LIBOR to CMT looks like it would be a very short-term solution at best and originators should focus efforts on preparing for SOFR-indexed ARMs.

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