With certain tenors of Libor set to cease publication in December—and with the majority of adjustable rate mortgages insured by the Federal Housing Administration based on Libor—the Department of Housing and Urban Development is seeking feedback on how it can transition away from Libor to an alternative rate. (As part of the transition, HUD has already approved the Secured Overnight Finance Rate index—the rate recommended by the Alternative Reference Rates Committee—for use in some circumstances.)
In an advance notice of proposed rulemaking published in the Federal Register today, HUD said it intends to propose two separate transitions: a transition that would replace Libor for existing mortgages and another to remove Libor and approve a new index for new forward originations.
“HUD’s goal is to avoid disrupting existing loans or causing unnecessary confusion during the transition,” the agency noted. “HUD also seeks to transition to an index which will best serve the goals of HUD’s forward and reverse mortgage programs. HUD intends that changes made to the existing forward mortgage program and reverse mortgage program occur simultaneously.” Comments on the proposal will be due on Dec. 6.
