Freddie Mac Announces Additional Details Regarding the LIBOR Transition

Rhea-AI Summary

Freddie Mac (FMCC) announced the transition of its legacy USD LIBOR-indexed contracts to the Secured Overnight Financing Rate (SOFR) after June 30, 2023, the final publication date for USD LIBOR rates. This transition aligns with the Federal Reserve Board's final rule and the guidance of its Conservator, the FHFA. Freddie Mac will not adopt term SOFR as a benchmark for new loans or floating-rate securities, nor will it convert existing 30-day Average SOFR-indexed instruments to term SOFR. The company plans to update its LIBOR Transition Playbook and FAQs to assist the housing finance industry with this transition.

Positive

• Transitioning to SOFR aligns with regulatory guidance and modernizes the financial framework.
• Freddie Mac is proactive in guiding the housing finance industry during this significant transition.

Negative

• The exclusion of term SOFR may limit flexibility in new loan products and floating-rate securities.

MCLEAN, Va., Jan. 13, 2023 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) reiterated today that it will transition its legacy U.S. dollar (USD) LIBOR-indexed contracts to an index based on the Secured Overnight Financing Rate (SOFR) for loans and securities for which Freddie Mac is responsible for selecting the replacement index. The transition will occur the day after June 30, 2023, the last date on which ICE Benchmark Administration Limited will publish a representative rate for all remaining tenors of USD LIBOR. The selected replacement index for each legacy LIBOR product can be found on Freddie Mac’s Reference Rates Transition webpage.

Additionally, in alignment with the Federal Reserve Board's final rule pursuant to the Adjustable Interest Rate (LIBOR) Act and based on guidance from Freddie Mac’s Conservator, the Federal Housing Finance Agency (FHFA), Freddie Mac will not include term SOFR as a benchmark index for new loans or floating-rate securities. As a result, Freddie Mac also will not take any steps to convert existing 30-day Average SOFR-indexed floating-rate loans or securities from 30-day Average SOFR to term SOFR. The preceding sentences apply to Freddie Mac’s multifamily floating rate loans, multifamily floating rate mortgage-backed securities, collateralized mortgage obligations and credit risk transfer securities.

We will update the LIBOR Transition Playbook and FAQs to help guide the housing finance industry in its transition to SOFR. Look for updated resources on Freddie Mac’s Reference Rates Transition webpage.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

MEDIA CONTACT: Fred Solomon
703-903-3861
Frederick_Solomon@freddiemac.com

INVESTOR CONTACT: Ameez Nanjee
571-382-4090

FAQ

When will Freddie Mac transition from LIBOR to SOFR?

Freddie Mac will transition its legacy LIBOR-indexed contracts to SOFR after June 30, 2023.

What index will replace LIBOR for Freddie Mac?

Freddie Mac will use the Secured Overnight Financing Rate (SOFR) as the replacement index.

Will Freddie Mac adopt term SOFR as a benchmark?

No, Freddie Mac will not include term SOFR as a benchmark index for new loans or floating-rate securities.

How is Freddie Mac supporting the transition from LIBOR to SOFR?

Freddie Mac plans to update its LIBOR Transition Playbook and FAQs to assist the housing finance industry.

What is the impact of the transition on existing loans?

Freddie Mac will not convert existing 30-day Average SOFR-indexed loans to term SOFR.