In Case You Missed It: Key Update on Adjustable-Rate Reverse Mortgages

For those who might have missed this crucial update, a significant change took place for adjustable-rate reverse mortgages. This alteration is tied to the expiration of a widely used interest rate index, which took place at the end of June.

The London Interbank Offered Rate, more commonly known as LIBOR, has long served as a fundamental index for determining interest rates in Home Equity Conversion Mortgages (HECMs). With LIBOR’s expiration date firmly set for June 30, 2023, a meticulously planned transition has been underway. Adjustable-rate HECMs that previously relied on LIBOR must now navigate a shift to a replacement index chosen by the Secretary of the U.S. Department of Housing and Urban Development (HUD).

This crucial update stems from a momentous announcement made by the Federal Housing Administration (FHA) on May 2, 2023. The FHA revealed the Secretary’s choice of the Chicago Mercantile Exchange (CME) Term Secured Overnight Financing Rate (SOFR) index to step in and replace LIBOR. This decision was carefully made due to the CME Term SOFR index’s comparability to LIBOR, with the primary goal of minimizing any disruptions for borrowers during this critical transition period.

To access the CME Term SOFR index, borrowers can visit Refinitiv’s website, the company responsible for publishing the index.

It is crucial for borrowers to stay informed that they will receive official notifications from their lenders regarding any changes to their interest rates. Importantly, no immediate action is required on the part of borrowers. However, if there are any lingering questions or concerns about these impending changes, borrowers are strongly encouraged to reach out to their lenders or loan servicers for clarification and guidance.

For those seeking further assistance and support, the FHA Resource Center can be reached at (800) CALL-FHA (1-800-225-5342). Individuals with hearing or speech impairments can access this service through TTY by contacting the Federal Information Relay Service at (800) 877-8339. Additionally, borrowers can conveniently submit their inquiries to the FHA Resource Center via email at: answers@HUD.gov. For 24/7 assistance, an online Knowledge Base is readily available at: www.hud.gov/answers.

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