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Financial Services Law Insights and Observations

Fannie, Freddie announce LIBOR transition plans

Federal Issues Fannie Mae Freddie Mac LIBOR GSEs SOFR Mortgages

Federal Issues

On December 22, GSEs Fannie Mae and Freddie Mac announced replacement indices based on the Secured Overnight Financing Rate (SOFR) for their legacy LIBOR indexed loans and securities (see here and here). The announcement follows the Federal Reserve Board’s final rule setting forth recommended replacement rates for financial contracts based on LIBOR (covered by InfoBytes here). For single-family mortgage loans and related mortgage-backed securities, the GSEs selected the relevant tenor of CME Term SOFR plus the applicable tenor spread adjustment, as published and provided by Refinitiv Limited (also known as “USD IBOR Cash Fallbacks” for “Consumer” products). The transition to the replacement indices will occur the day after June 30, 2023, which is the last date on which the Intercontinental Exchange, Inc. Benchmark Administration Limited will publish a representative rate for all remaining tenors of U.S. dollar LIBOR. The GSEs also published replacement indices for multifamily mortgage loans and related mortgage-backed securities, single family and multifamily collateralized mortgage obligations and credit risk transfer securities, and derivatives.