Skip to main content

Industry Reaction Varied to Life Beyond LIBOR

Phil Hall
Jun 04, 2019
The Mortgage Bankers Association (MBA) has published a primer that addresses potential transition issues ahead of the potential 2021 ending of the London Interbank Offered Rate (LIBOR)

The upcoming expiration of the London Interbank Offered Rate (LIBOR) is being met with a somewhat unwieldly response by U.S. commercial and multifamily real estate finance firms, according to a survey by the Mortgage Bankers Association’s (MBA) LIBOR Outreach Committee.
 
LIBOR is used as the base rate for adjustable-rate commercial and multifamily mortgages totaling more than $1 trillion. It is set to expire at the end of 2021, and the MBA found 92 percent of the commercial and multifamily mortgage lenders it polled have already begun planning for the transition away from LIBOR, with 77 percent already including adjusted LIBOR fallback language in all new loan documents.
 
However, only slightly more than half of respondents–56 percent–said they were on track in preparing for a future without LIBOR, while detailed plans for the transition away from LIBOR were scattershot. Forty-one percent of respondents said they might use the Secured Overnight Financing Rate (SOFR) as the alternative to LIBOR, while 43 percent said they did not know what rate they will use. Thirty-two percent said they would implement an adjustable-rate alternative to LIBOR in advance of the cessation of LIBOR, but 18 percent said they would not and 37 percent said they don’t know how they would proceed. As for following the recommendations of the Alternative Reference Rates Committee (ARRC), 59 percent said they did not know if they would; 59 percent also said they would defer to guidelines from regulators and industry-bodies to make decisions before they took specific actions.
 
“The vast majority of commercial and multifamily mortgage lenders report they are working on the transition away from LIBOR, but the devil is in the details,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Most firms are already taking some steps, including changing language in loan documents, but they also report relying on regulators and industry-bodies to make decisions before they take certain actions. The net result is a fair amount of uncertainty about the mechanics of the transition away from LIBOR, and an overall hesitation as many firms wait for others to lead the way.”

 
Mortgage Lenders Expect Profit Margins To Shrink

69% of lenders believe profit margins will decrease in the months ahead, while 19% believe profits will remain the same, and 11% believe profits will increase.

Industry News
Jun 14, 2021
Real Estate Industry Calls To End Eviction Moratorium On June 30, 2021

Expanding the moratorium will only increase levels of debt on renter households and impede the recovery of the housing sector.

Industry News
Jun 14, 2021
Fifth Third Bank Expands Down Payment Assistance Program

The program will provide up to $3,600 towards a down payment for families with low to moderate income.

Industry News
Jun 09, 2021
Filo Mortgage Launches Low-Rate Guarantee

National mortgage lender Filo Mortgage is offering to beat competitors' pricing by $1,000 with its Low-Rate Guarantee.

Industry News
Jun 08, 2021
FAU Index Shows Where Consumers Should Buy Or Rent

Consumers are better off renting in cities like Dallas, Texas

Industry News
Jun 07, 2021
Verus Title Inc. Expands Into Dallas-Fort Worth Texas

Verus plans to take advantage of the Dallas-Fort Worth market before expanding throughout the state.

Community
Jun 07, 2021