FHFA to FHLBanks: Drop LIBOR

Sep 27, 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 Federal Housing Finance Agency (FHFA) has sent a letter to the 11 Federal Home Loan Banks directing them to cease purchasing investments in assets tied to LIBOR with a contractual maturity beyond Dec. 31, 2021.

The FHFA gave the banks a Dec. 31 deadline to cease these purchases. As of March 31, 2020, the Federal Home Loan Banks will be required to end all other LIBOR-based transactions involving advances, debt, derivatives, or other products with maturities beyond Dec. 31, 2021, with only very limited exceptions granted by FHFA.

“This is an important step in the transition away from LIBOR to a more robust reference rate,” said FHFA Director Mark Calabria said. “Beginning this process immediately and providing clear timelines will help the Federal Home Loan Banks manage the risks associated with LIBOR in the most safe and sound manner possible.”

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Phil Hall

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Sep 27, 2019

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