NRMLA Comments On LIBOR Transition and H4P Improvements

NRMLA Comments On LIBOR Transition and H4P Improvements

On behalf of its members, NRMLA submitted comments to the Department of Housing and Urban Development requesting that lenders and servicers be given 180 days to prepare for a transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) index and encouraged FHA to continue implementing policies that align HECM for Purchase with forward mortgages.

In a Federal Register notice published last month, HUD stated the model HECM Adjustable Rate Note has been revised to align with FHA’s transition from LIBOR to SOFR, which includes, but is not limited to, new definitions and replacement index language for future adjustable interest rate index transition events.

“The SOFR transition encompasses two distinct efforts,” says NRMLA. “The first relates to the origination of new adjustable rate HECMs tied to SOFR. The second is the transition of legacy adjustable rate LIBOR indexed HECMs to SOFR. Each presents unique industry challenges impacting different processes and systems. For that reason, HECM originators and servicers respectfully request no less than [180] days advance notice before the SOFR Index is required to either (i) originate new SOFR indexed adjustable rate HECMs, or (ii) to transition legacy LIBOR indexed adjustable rate HECMs to SOFR.”

NRMLA encouraged FHA to publish the revised model Note soon and to provide the industry with a reasonable period of time to comment on the proposed revisions before anything is finalized. Because some countries are experiencing negative interest rate environments, NRMLA requested that language be added to the model Note that establishes an interest rate floor.

The Federal Register Notice also suggests an intention on the part of FHA to allow new construction for HECM for Purchase loans. “We applaud this development,” says NRMLA, and “encourage FHA to further align its forward and reverse mortgage programs by permitting H4P to accept (i) all permissible forward mortgage program down payment funding sources, and (ii) all allowable forward mortgage program lender closing cost credits, adjustments and discounts.

Read the full letter by logging into the Comment Letter section of

Published by

Darryl Hicks

Darryl Hicks is Vice President of Communications for the National Reverse Mortgage Lenders Association. In this capacity, Hicks writes for NRMLA's publications, manages the association's web sites and social media accounts, assists committees and the Board of Directors, and manages the Certified Reverse Mortgage Professional designation. Prior to joining NRMLA in 1999, Hicks spent three years in the Washington, D.C. bureau for National Mortgage News.