MCLEAN, Va., Dec. 22, 2022 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC ) announced today that it will transition its legacy U.S. dollar (USD) LIBOR-indexed contracts to an index based on the safe overnight funding rate. (SOFR) for loans and securities for which Freddie Mac is responsible for selecting the replacement index. The transition will occur on the day following June 30, 2023, the last date on which ICE Benchmark Administration Limited publishes a representative rate for all remaining tenors of USD LIBOR.
“The transition of Freddie Mac’s existing LIBOR contracts to the new index rate will be the culmination of a long and consistent project to replace the index in these contracts,” said John Glessner, Freddie Mac’s senior vice president and head of investments and capital markets. “As this effort nears completion, we thank the Alternative Reserve Rates Committee convened by the Federal Reserve Board and our regulator, the Federal Housing Finance Agency, for their guidance.”
The transition includes Freddie Mac’s legacy LIBOR-indexed single-family adjustable rate mortgages (ARMs), derivatives, multifamily floating rate loans, multifamily floating rate mortgage-backed securities, collateralized mortgage obligations and credit risk transfer securities. Freddie Mac plans to transition as follows:
For single-family ARMs, Freddie Mac servicers will be instructed to transition to a fully customized SOFR term recommended by the Federal Reserve Board and administered and published by Refinitiv Limited, which will include a one-year transition period.
Derivatives will generally use benchmark swaps identified in the 2020 Reserve Protocol published by the International Swaps and Derivatives Association.
Multifamily floating rate loans, multifamily floating rate mortgage-backed securities, collateralized mortgage obligations and credit risk transfer securities will move to the comprehensive replacement rates recommended by the Federal Reserve Board for FHFA-regulated unit contracts. These rates consist of the 30-day average SOFR rate published by the Federal Reserve Bank of New York, plus an appropriate adjustment to the tenor spread.
The replacement rates announced today use the replacement rates recommended by the Federal Reserve Board, contained in regulations implementing the LIBOR Act, which will take effect in March 2022. This announcement follows the announcement of final regulations by the Federal Reserve Board. More information on Freddie Mac’s efforts to transition from LIBOR, including a list of Legacy LIBOR products set to transition, can be found on the company’s Reference Rates Transition website.
Freddie Mac empowers millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we have made housing more affordable and accessible to homebuyers and renters across the country. We’re building a better housing finance system for homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com on Twitter @FreddieMac and Freddie Mac’s blog at FreddieMac.com/blog.
Media contact: Fred Solomon
Investor contact: Amez Nanji