This is an informational notice only regarding upcoming changes to adjustable rate notes or modifications that we service.
As of June 30, 2023, the index used to determine the adjustable rate is changing because the London Interbank Offered Rate (LIBOR) will be retired. The new index will be the Secured Overnight Financing Rate (SOFR).
The new index, based on extensive analysis, is recommended by a number of government authorities and banking experts including the Federal Reserve.
Additional information below in related FAQs
On March 5, 2021, the Financial Conduct Authority (“FCA”), the British Agency that administers LIBOR, announced that all USD LIBOR rates will cease to be published after June 30, 2023. As a result, President Biden signed into law the LIBOR Act on March 15, 2022. This Act is intended to establish a process for transitioning all adjustable rate loans currently using a LIBOR index to a new, reliable index. The Act also gave the Federal Reserve Board the authority to recommend a Replacement Index. The Federal Reserve chose SOFR (Secured Overnight Financing Rate) as the Recommended Index to replace the various LIBOR rates. No. Aside from the index, the other terms regarding ARM rate changes will not be altered. The index will continue to adjust based on market conditions and the timelines disclosed in your note. Your margin, rounding factor, per change and lifetime caps will remain the same. No. The LIBOR Act is intended to establish a standardized process for transitioning all adjustable rate loans across all servicers to a reliable index. Rushmore will begin using the SOFR index to calculate your new rate starting July 1, 2023, for all adjustable notes and modifications. Interest rates on ARM products are not all adjusting because of the index change. However, if you have a HELOC which adjusts monthly, or if your ARM note or modification Change Date is July 1, 2023, then your new interest rate will be calculated using the SOFR index along with your margin. Learn more about how interest rate is calculated on an ARM loan in this FAQ If your note reflects a 1 month LIBOR, your new SOFR index will be based on the 1 month SOFR. The same logic will be applied for all LIBOR indices to be replaced with the equivalent SOFR, including the 3 month, 6 month, 12 month, and other similar indices. SOFR is published every business day by the New York Federal Reserve for the previous business day. You can view the latest published rate and available history for SOFR on the NewYorkFed.org website.
FAQs above and additional categories and topics are available on our full FAQ page.