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Financial Services Law Insights and Observations

FHA seeks comment on LIBOR transition

Agency Rule-Making & Guidance Federal Issues HUD FHA LIBOR Mortgages SOFR

Agency Rule-Making & Guidance

On October 19, FHA published a proposed rule in the Federal Register seeking public comment on transitioning existing FHA-insured forward and home equity conversion mortgage (HECM) adjustable rate mortgages (ARMs) from LIBOR to a spread-adjusted Secured Overnight Financing Rate (SOFR) index, after the one-year and one-month LIBOR indices cease to be published on June 30, 2023. The proposed rule also mentioned removing LIBOR and adding SOFR as an approved index for newly originated forward ARMs. According to the proposed rule, this change was made for HECM ARMs in Mortgagee Letter 2021- 08 and added to this proposed rule. As previously covered by InfoBytes, in March 2021, FHA issued ML 2021-08 announcing changes for adjustable interest rate HECMs as the market transitions away from LIBOR. Comments are due by November 18.