The Mortgage Bankers Association (MBA) announced it has released two templates for adjustable-rate mortgages (ARM) in preparation for the expiration of the London Interbank Offered Rate (LIBOR). LIBOR is currently the leading reference rate for adjustable-rate single-family mortgages in the U.S. but will be permanently discontinued after June 30, 2023.
“MBA continues to work closely with public and private sector entities to provide members with the resources they need to ensure a smooth transition for the mortgage industry and consumers,” Pete Mills, MBA senior vice president of residential policy and member engagement, said in a release.
The first template is structured as a notice for existing ARM borrowers; the second is structured as a letter to the same group. The templates let ARM borrowers know that any index changes will not affect most of the other terms of an ARM, including the maximum interest rate paid during the life of the loan or the timing of any interest rate set. MBA members will have access to editable versions of these templates and can adjust them as they see fit.
Once LIBOR is no longer available or is deemed unsuitable, the organization said, lenders will replace LBIOR with a new index to determine the future interest rate and payment changes to a borrower’s ARM.