As two of the largest participants in the lending market, Fannie Mae and Freddie Mac (the “GSEs”) are busy preparing for the transition away from LIBOR. Both GSEs have established milestones for beginning acquisition and issuance of SOFR-indexed products and ceasing LIBOR-indexed products. Below are reminders of important deadlines:
Single-Family (“SF”) ARMs and Securities:
|August 3, 2020||Fannie Mae began accepting delivery of SOFR-indexed ARMs.|
|September 30, 2020||LIBOR applications end. All LIBOR loans must have Application Received Date on or before this date.|
|November 16, 2020||Freddie Mac will begin accepting delivery of SOFR-indexed ARMs.|
|December 1, 2020||This the last MBS/Guarantor PC issue date for LIBOR-indexed ARM pools.|
|December 31, 2020||This is the last date for cash/whole loan purchase of LIBOR-indexed ARMs.|
Single-Family Credit Risk Transfer (“SF CRT”) transactions:
|Q4 2020||Freddie Mac will be operationally prepared to begin issuing SOFR-indexed SF CRT transactions, with actual execution based on market readiness.|
|By the end of Q4 2020||Both GSEs will discontinue issuance of LIBOR-indexed SF CRT deals.|
|Q1 2021||Fannie Mae will be operationally prepared to begin issuing SOFR-indexed SF CRT transactions, with actual execution based on market readiness.|
Collateralized Mortgage Obligations (“CMOs”):
|July 2020||GSEs started offering SOFR-indexed CMOs for settlement.|
|October 2020||Freddie Mac and Fannie Mae will cease offering new LIBOR-indexed CMOs for issuance. The GSEs will continue to issue new resecuritizations of LIBOR-indexed CMOs (also known as “ReREMICs”), provided that such resecuritizations do not increase the total unpaid principal balance of the LIBOR- indexed CMOs outstanding.|
Fannie Mae Multifamily ARMs and MBS:
|By Q4 2020||Fannie Mae Multifamily will release a SOFR-indexed capped ARM product and begin offering SOFR-indexed Structured ARMs, 7/6 ARMs and Hybrid ARMs.
System capabilities will be in place for lenders to deliver SOFR-indexed ARMs with an embedded cap and SOFR- indexed uncapped ARMs.
Investors will be able to invest in Fannie Mae issued MBS based on a capped SOFR-indexed ARM.
|October 1, 2020||Applications for LIBOR-indexed ARMs will no longer be accepted.|
|January 1, 2021||Fannie Mae Multifamily will no longer purchase LIBOR-indexed ARMs (i.e., must be purchased on or before December 31, 2020 as a Cash Mortgage Loan or MBS Mortgage Loan with an Issue Date on or before December 1, 2020)|
|2021||Legacy LIBOR-indexed ARM products will be converted to an alternative reference rate at Fannie Mae Multifamily’s discretion upon LIBOR no longer being available.|
Freddie Mac Multifamily (“MF”) Floating Rate Loans and Securities
|September 1, 2020||Freddie Mac will no longer issue quotes for LIBOR-indexed loans; all new floating-rate quotes will be for SOFR-indexed loans. For SBL, Optigo® lenders will no longer issue applications for SBL hybrid loans with a floating-rate period indexed to LIBOR; all new hybrid loan applications issued will be SOFR-based.|
|September 30, 2020||This is the last day for LIBOR-indexed floating-rate and hybrid loans to go under application.|
|November 9, 2020||This is the last day for submission of underwriting package for LIBOR-indexed floating-rate and hybrid loans to Freddie Mac.|
|December 11, 2020||This is the last day for submission of final delivery package for LIBOR-indexed floating-rate and hybrid loans to Freddie Mac.|
|December 31, 2020||This is the last day for Freddie Mac to purchase LIBOR-indexed floating-rate and hybrid loans, regardless of the loan application or the date of the note.|
Fannie Mae Multifamily Credit Risk Transfer (“MF CRT”) transactions
|By end of Q4 2020||Issuance of LIBOR-indexed MF CRTs will be discontinued.|
|Q1 2021||Fannie Mae will be operationally prepared to begin issuing SOFR-indexed MF CRT transactions, with actual execution based on market readiness.|
Freddie Mac MF CRT transactions
|Q4 2020||Freddie Mac will be operationally prepared to begin issuing SOFR-indexed MF CRT transactions, with actual execution based on market readiness.|
Duane Morris’ LIBOR Transition Team: Roger S. Chari, Chair, Joel N. Ephross, Amelia (Amy) H. Huskins, Phuong (Michelle) Ngo, and Han Wang.