The Forbearance ‘Rescue’

Some unexpected GOOD news came just before the weekend. Last Thursday the Federal Housing Administration announced the LIBOR has been officially dropped and replaced with the Single Overnight Financing Rate for adjustable rate Home Equity Conversion Mortgages. The change was formalized in Mortgagee Letter 2021-08. What is the SOFR? Investopedia states the “SOFR is based on transactions in the Treasury repurchase market …Adding the SOFR, “is an influential interest rate that banks use to price U.S. dollar-denominated derivatives and loans”

The road to adopting the SOFR index for HECMs was not a smooth one. Despite years of advance notice of a shift away from the LIBOR, the early deadlines left little time for both lenders and secondary markets to react. Fortunately, those speed bumps are behind us. However before you pop the champagne note the following: First, the EXPECTED RATE FOR both annual & monthly adjustable HECMs

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Guy Schwartz March 15, 2021 at 12:36 pm

I think that you may have a mistake in your presentation look at 3:10 you state the rate went up it was .7 and the number shown is .102, maybe that should have bee 1.02?

Shannon Hicks March 17, 2021 at 6:05 am

Guy- thank you for catching that. I inverted my numbers for the summer period.


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