The final rule issued by the Federal Reserve Board to implement the LIBOR Act by establishing default rules for benchmark replacements in certain contracts that use LIBOR as a reference rate was published in today’s Federal Register and will become effective on February 27, 2023.
Yesterday, Fannie Mae and Freddie Mac issued instructions to servicers on replacement indices for their legacy single-family mortgage loans with 1-month, 6-month, and 1-year LIBOR indices. The instructions include a table that lists the Term Secured Overnight Financing Rate (SOFR) plus transition tenor spread adjustment that replaces each of the three LIBOR indices. The spread adjusted term SOFR is administered by the CME Group Benchmark Administration, LTD. and published by Refinitiv Limited. The transition to the replacement indices will occur on July 1, 2023.