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.