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HUD Publishes LIBOR Transition Final Rule

HUD Publishes LIBOR Transition Final Rule

The Department of Housing and Urban Development published a final rule today that replaces the London Interbank Offered Rate (LIBOR) as an approved index for new and existing adjustable-rate forward and reverse mortgages with the Secured Overnight Financing Rate (SOFR).

The final rule will go into effect in 30 days.

Several concerns raised by NRMLA in a November 18 comment letter were addressed in the final rule, including:

  • HUD established a spread-adjusted SOFR index as the Secretary-approved replacement index to transition existing forward and HECM ARMs off LIBOR;
  • The lifetime cap for Monthly Adjustable HECMs is no more than 10 percent higher or lower than the initial interest rate;
  • The interest rate index (not the note rate) can never go below 0.00 percent; and
  • HUD removed the proposed “adjusted to a constant maturity” language when applied to SOFR for new originations.

NRMLA will continue to review this final rule and keep members posted with any updates.

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.