FHA adopted rules transitioning from the London Interbank Offered Rate (LIBOR) index to the Secured Overnight Financing Rate (SOFR) index for FHA-insured ARMs. Per the adopted rules, FHA established the spread-adjusted SOFR as an approved index for the transition of existing FHA-insured ARMs from the LIBOR index after the 1-year and 1-month LIBOR indices cease to be published after June 30, 2023.
In addition, FHA:
- Replaced the LIBOR with the SOFR as an approved index for newly originated forward ARMs;
- Codified the approval of SOFR as an approved index for newly-originated HECM ARMs (previously announced in Mortgagee Letter 2021-08);
- Clarified regulatory changes to the requirements for monthly adjustable HECM ARMs; and
- Established a 10% maximum lifetime adjustment cap for monthly adjustable rate HECM ARMs.
The adopted rules become effective March 31, 2023.
Click to view the FHA Info #2023-13: https://www.tenaco.com/wp-content/uploads/2023/03/FHA-Info-2023-13.pdf
