Adjustable Rate Mortgages: Transitioning From LIBOR to Alternate Indices

Document 2021-21512 is a Proposed Rule published by the Department of Housing and Urban Development in the Federal Register on October 5, 2021. The majority of adjustable rate mortgages (ARMs) insured by the Federal Housing Administration (FHA) are based on the London Interbank Offered Rate (LIBOR), an interest rate index that is likely to become uncertain after December 31, 2021 and no longer be published after June 30, 2023. In reaction to this uncertainty, HUD has begun to transition away from LIBOR as an approved interest rate index. HUD has also approved the Secured Overnight Financing Rate (SOFR) index in some circumstances. HUD recognizes there may be operational difficulties for mortgagees to implement the change to a new index. HUD is considering a rule that would address a Secretary-approved replacement index for existing loans and provide for a transition date consistent with the cessation of the LIBOR index. HUD is also considering replacing the LIBOR index with the SOFR interest rate index, with a compatible spread adjustment to minimize the impact of the replacement index for legacy ARMs. View the original at https://www.federalregister.gov/documents/2021/10/05/2021-21512/adjustable-rate-mortgages-transitioning-from-libor-to-alternate-indices.

No. Document 2021-21512 is not classified as economically significant under Executive Order 12866. Economically significant rules require OIRA review and are estimated to have impacts of $100 million or more per year.