The American Bankers Association and a coalition of trade groups today—in response to an advanced notice of proposed rulemaking by the Department of Housing and Urban Development—asked the Federal Housing Administration to issue a clear roadmap for servicers of FHA-insured adjustable-rate mortgages as the agency transitions from Libor to alternative reference rates.
The groups said the roadmap should include specifications of a replacement comparable index for Libor for existing mortgages and guidance on communications with borrowers. They added that the replacement index selected by HUD should be based on observable transactions, be subject to established governance processes, minimize differences in borrower payments between Libor and a replacement index and meet standards set by the International Organization of Securities Commissions.
“It is critical that servicers feel confident that by transitioning to a HUD-approved replacement comparable index, they are not breaching contractual terms and are not subject to increased litigation risk,” the groups said.
