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LIBOR Transition

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​LIBOR Transition


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Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBanks) all have financial instruments that reference Intercontinental Exchange London Interbank Offered Rate (ICE LIBOR), the most widely used int​erest rate benchmark in the world.  Since 2017, the Financial Conduct Authority, the United Kingdom-based regulator of LIBOR, has been warning market participants that it will stop compelling panel banks to submit LIBOR quotes beginning in 2022, which could result in a declaration that LIBOR is no longer representative of market activity. On March 5, 2021, the FCA announced that the publication of 1-week and 2-month US dollar LIBOR will cease after December 31, 2021, and the publication of all other US dollar LIBOR settings will cease or be deemed unrepresentative after June 30, 2023.

FHFA serves as an ex officio non-voting member of the Alternative Reference Rates Committee (ARRC) established by the Federal Reserve Board and the New York Federal Reserve Bank to facilitate the migration away from LIBOR to the Secured Overnight Financing Rate (SOFR), the rate selected by ARRC as a more robust transactions-based replacement for LIBOR in the U.S.  Fannie Mae, Freddie Mac, and the FHLBanks (through the FHLBank of New York) all serve as members of the ARRC.

FHFA is working with its regulated entities to monitor their exposure to LIBOR as they execute their transition plans away from LIBOR.  The FHFA’s regulated entities (Fannie Mae, Freddie Mac, and the FHLBanks) are now regular issuers of SOFR-indexed debt.

Steps Taken

  • FHFA worked with Fannie Mae and Freddie Mac to develop the parameters of a SOFR-based adjustable-rate mortgage (ARM) and to develop more robust “fallback language” for ARMs that describe how a replacement rate would be selected in the event of the cessation of an ARM’s reference rate. 
  • Fannie Mae and Freddie Mac have ceased purchasing seasoned LIBOR-based ARMs. 
  • Effective January 1, 2020, FHFA has prohibited the Banks from purchasing LIBOR-linked investments with maturities beyond December 31, 2021.
  • On May 27, 2020, at the direction of FHFA, Fannie Mae posted a supplement and Freddie Mac posted amendments to disclosures governing certain legacy LIBOR-indexed collateralized mortgage obligations (CMOs) that did not contemplate a permanent LIBOR cessation.
  • Effective June 30, 2020, the FHLBanks ceased entering into all other LIBOR transactions with maturities that extend beyond December 31, 2021, with only very limited exceptions granted by FHFA.  This date was extended from its original date of March 31, 2020, and this extension did not cover option-embedded products.   
  • As of July 2020, both Fannie Mae and Freddie Mac offered SOFR-indexed CMOs.
  • On August 3, 2020, Fannie Mae started accepting whole loan and MBS deliveries of single-family adjustable-rate mortgage (ARM) loans indexed to the SOFR.​
  • Beginning September 1, 2020, Fannie Mae began quoting multifamily ARM loans indexed to SOFR but did not accept delivery on October 1, 2020. Freddie Mac began issuing quotes for multifamily SOFR-indexed floating rate loans on September 1, 2020 and purchased its first SOFR-indexed loan at the end of September 2020.
  • Fannie Mae began issuing multifamily and single-family MBS backed by SOFR-indexed ARMs on September 10, 2020 and October 23, 2020, respectively.
  • Under the guidance of FHFA, effective October 1, 2020, Fannie Mae and Freddie Mac ceased issuing new LIBOR-indexed CMOs.
  • Freddie Mac announced that it priced its first SOFR linked Single-family CRT offering on October 16, 2020.  The offering size was $1.086 billion for the STACR REMIC 2020-DNA5 offering. Freddie Mac announced that it priced its first SOFR linked multifamily CRT offering on January 12, 2021.  The offering size was approximately $276 million. The details of the offering and the pricing for the different tranches are available in Freddie Mac’s News Release.
  • On December 12, 2019, Freddie Mac announced that it priced its first multifamily K-Deals (K-F73 Certificates) indexed to SOFR but backed by LIBOR loans, and on December 9, 2020, it announced that it priced its first multifamily K-Deals (K-F95 Certificates) indexed to SOFR and backed by SOFR loans.
  • On November 9, 2020, Freddie Mac started accepting whole loan and MBS deliveries of single-family adjustable-rate mortgage (ARM) loans indexed to the SOFR.
  • On December 31, 2020, Fannie Mae and Freddie Mac ceased purchasing LIBOR-based ARMs.
  • On December 31, 2020, Fannie Mae and Freddie Mac ceased issuing LIBOR-based credit risk transfers (CRT).

Fannie Mae and Freddie Mac have launched LIBOR transition websites that provide key resources for lenders and investors as the Enterprises transition away from LIBOR.

See below for additional information on steps that FHFA and its regulated entities are taking to lower the regulated entities' respective exposures to post-2021 LIBOR products in a safe, sound, and prudent manner.         

News Releases:

Papers: 

Statements:

Testimony:

Other:

​

CONTACT:   

Daniel E. Coates, Senior Advisor to Acting Director and Chairman of the FHFA's Reference Rate Transition Steering Committee
Phone: (202)649-3280  Email: Daniel.Coates@fhfa.gov; RRT@fhfa.gov

Page last updated:  December 22, 2022​​​​​​​​​
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