WASHINGTON—With the basis for many rates, the London Interbank Offered Rate (LIBOR), expected to no longer publish after 2021, Fannie Mae is set to develop an adjustable-rate mortgage product that will be indexed to the Secured Overnight Financing Rate (SOFR).
The Alternative Reference Rates Committee – a group convened by the Federal Reserve – has published a white paper "intended to help illustrate a model of how market participants could use the [SOFR] in consumer closed-end, residential [ARM] products.”
Fannie Mae noted the benefits of using SOFR to index and said it will develop the ARM product "after systems and processes have been put in place to accommodate the new index, and will provide reasonable notice in advance of the offering to [Fannie Mae's] lenders." It will release an updated Selling Guide once the new product is developed, NAFCU said.
NAFCU said it will monitor Fannie Mae's efforts to see how this new SOFR-indexed product could impact lending.