FNMA has announced pending plans to modify their ARM products in the first half of 2020 (see https://www.fanniemae.com/content/news/libor-sofr-transition?utm_campaign=ssn-sell2019iss&utm_source=sfsfmc&utm_medium=email&utm_content=eml-noa-1120b-o-n&utm_term=b2b). These changes are being done under the guidance of the FHFA and in coordination with FHLMC.
Some of the planned changes include incorporating the Alternative Reference Rate Committee’s (ARRC’s) “fallback language” into the uniform notes and other legal documents for ARMs. New ARM products based on the Secured Overnight Financing Rate (SOFR) index are also planned, with the index being based on a 30-day average of the overnight SOFR.
While no changes are finalized at this time, we will continue to monitor this transition and post Compliance News alerts when changes are finalized and announced.