FHA issued Mortgagee Letter 2023-09, implementing the provisions of the Adjustable Rate Mortgages (ARMS): Transitioning from London Interbank Offered Rate (LIBOR) to Alternative Indices rule published in March. Per the Mortgagee Letter, FHA:
- Replaced the 1-year LIBOR with the 30-day average Secured Overnight Financing Rate as an acceptable index;
- Added new policy for transitioning existing LIBOR-indexed ARMs (including HECMs) to the SOFR;
- Updated policy with respect to interest rate adjustments on existing ARMs (in the event of conflicting provisions, the new policy supersedes the policy in FHA HECM Handbook 4235.1, REV-1 and 4330.1, REV-5);
- Updated policy for new originations of adjustable rate HECMs (the new policy supersedes the policy in Mortgagee Letter 2021-08, Home Equity Conversion Mortgage Program – Changes to Interest Rate Requirements Including Removal of the LIBOR Index);
- Established a monthly adjustable HECM maximum mortgage note interest rate; and
- Modified the model HECM first and second notes.
The revisions related to the transition of existing LIBOR-indexed ARMs to the SOFR are effective as of the next interest rate adjustment date on or after the 1st London banking day after June 30, 2023. The revisions related to the changed HECM model notes are effective for all case numbers assigned on or after July 1, 2023 (lenders may, however, use the new Notes immediately). All other changes are effective immediately.
Click to view the FHA Mortgagee Letter 2023-09: https://www.tenaco.com/wp-content/uploads/2023/05/FHA-Mortgagee-Letter-2023-09-05-02-23.pdf
Click to view the FHA Info #2023-36: https://www.tenaco.com/wp-content/uploads/2023/05/FHA-Info-2023-36-05-02-23.pdf
