The Mortgage Bankers Association (MBA) recently released templates, one in a notice form and one in letter form, to advise borrowers with existing adjustable rate mortgage (ARM) loans that use the London Interbank Offered Rate (LIBOR) as the index of the upcoming transition away from LIBOR. The templates are available on the MBA’s LIBOR Transition Resources webpage.
The templates are designed to advise borrowers that in the future the LIBOR index will be replaced with another index, and that more information on the replacement will be provided in the future. The templates also advise borrowers that in addition to the replacement of the LIBOR index, the margin also may change, but that no other aspects of the note will change. The templates specifically point out that there will be no change to the maximum interest rate that the consumer may pay, or to the timing of interest rate resets.
Parties considering the use of the templates should compare them to the existing ARM notes in their portfolio and make changes as appropriate to conform with the notes.
In 2019 the MBA released a template to advise consumers considering ARM loans that LIBOR would be replaced in the future. That template also is available on the MBA’s LIBOR Transition Resources webpage.