In the Management Minute portion of our January 2020 Banking on BCC magazine, we alerted you to the fact that LIBOR (London Interbank Offered Rate) will be going away for good. It’s not known exactly when that will happen but it will likely be sometime within the next 18 months. The CFPB is already preparing for this and, if you make closed-end Adjustable Rate Mortgages (ARMs), their recent changes will impact you whether you use LIBOR or not.
The most immediate change is that the CFPB has issued a revised Consumer Handbook on Adjustable-Rate Mortgages (CHARM) booklet. While you can continue to use your existing supply, you should then transition to the “new” version. In other words, don’t print any more copies of the previous version. If your software or lenders use a link to pull up the booklet, make sure it’s going to the version dated 6/20 on the last page.
If you currently use LIBOR, the CFPB is proposing some changes to Regulation Z to address the transition and have issued some “Fast Facts” on the proposed changes. The proposal addresses items like the timing and selection of replacement indices. Comments on the proposal are due by August 4, 2020. Remember, though, that while you have the regulatory requirements to contend with, you must also stay in line with your loan contracts and open-end agreements. If you use LIBOR, you may want to add looking at how those contracts address replacement indices to your “to-do” list, as well.
The CFPB also issued LIBOR Transition FAQs to provide additional guidance for this upcoming change.
We’re here to help you stay on top of these changes. Stay Tuned!
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