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ARTICLE · 17 FEBRUARY 2020

LIBOR Transition: Fannie Mae And Freddie Mac To Stop Accepting LIBOR, Begin Accepting SOFR

A&O Shearman
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The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) announced on Wednesday

United StatesFinance and Banking
Donna Parisi
Donna Parisi
Geoffrey Goldman
Geoffrey Goldman
Azam Aziz
Azam Aziz
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The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) announced on Wednesday, February 5th, that they will stop accepting LIBOR-indexed adjustable-rate mortgages (ARMs) by the end of 2020. Additionally, the two government sponsored agencies announced that they will soon accept mortgages tied to the Secured Overnight Financing Rate (SOFR) later in 2020. This announcement from Fannie Mae and Freddie Mac to move away from LIBOR and begin accepting SOFR ARMs is an important step in the market-wide transition to the Alternative Reference Rates Committee (ARRC) recommended SOFR.

Background

The ARRC, a working group established by the Federal Reserve Board of New York to help the transition away from LIBOR, has established a market consensus in favor of SOFR in the transition away from LIBOR. The ARRC is made up of members including Fannie Mae, Freddie Mac, lenders, investors, servicers and consumer advocates.

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