LIBOR Transition Playbook

Collateral Mortgage Obligations (CMO)

December 2023
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Summary of Changes

The table below details the list of changes since the June 2023 version of the LIBOR Transition 

Playbook was published on the Fannie Mae and Freddie Mac websites.

Section Summary of changes

1. CMOs 

Additional 

Considerations 

▪ Provided updated guidance on CMO bonds or swaps with interest rate caps 

transitioning to the ISDA protocol Fallback rate 
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Legal information and disclaimer

Information in the London Interbank Offered Rate (“LIBOR”) Transition Playbook is preliminary and 

subject to revision and updates from time to time. This document is an indicative summary of our 

preliminary analysis regarding the potential upcoming LIBOR transition. This document and the 

analysis may be amended, superseded or replaced by subsequent summaries or actions. The 

analyses, preliminary views and opinions expressed herein are based on certain assumptions that also 

are subject to change. Readers should rely on the information contained in the loan documentation, 

securities offering documents, operative documents, etc. in order to evaluate the rights and 

obligations for each such loan or security. As a reminder, Fannie Mae and Freddie Mac (the “GSEs”) are 

in separate conservatorships and their conservator (“FHFA”) has the authority to direct either or both 

GSEs to take whatever actions it deems appropriate in respect of any LIBOR transition and product or 

contract.

Neither GSE guarantees the accuracy or completeness of information that is contained in this 

document, or that the information is appropriate or useful in any particular context, including the 

context of any investment decision, and it should not be relied upon as such. No representations or 

warranties are made as to the reasonableness of the assumptions made within or the accuracy or 

completeness of any information contained herein. All opinions and estimates are given as of the date 

hereof and are subject to change and neither GSE assumes any obligation to update this document to 

reflect any such changes. The information herein is not intended to predict actual results and no 

assurances are given with respect thereto. No representation is made that any strategy, performance, 

or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those 

assumed, including factors not mentioned, considered or foreseen, by themselves or in conjunction 

with other factors, could produce dramatically different performance or results. Nothing herein will be 

deemed to constitute investment, legal, tax, financial, accounting or other advice. No part of this 

document may be duplicated, reproduced, distributed or displayed in public in any manner or by any

means without the written permission of Fannie Mae and Freddie Mac.

This playbook does not constitute an offer to sell or the solicitation of an offer to buy securities of 

either GSE. Nothing in this playbook constitutes advice on the merits of buying or selling a particular 

investment. Any investment decision as to any purchase of securities referred to herein must be made 

solely on the basis of information contained in the respective GSE’s applicable offering documents, 

and no reliance may be placed on the completeness or accuracy of the information contained in this 

playbook. You should not deal in securities unless you understand their nature and the extent of your 

exposure to risk. You should be satisfied that they are suitable for you in light of your circumstances 

and financial position. If you are in any doubt, you should consult an appropriately qualified financial 

advisor.

Please be aware that the federal Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) became law on 

March 15, 2022. As required by the Act, the Board of Governors of the Federal Reserve System 

(“Board”) published regulations identifying Board-selected benchmark replacement rates based on 

the Secured Overnight Financing Rate (“SOFR”) on December 16, 2022. The regulations published by 

the Board have a significant impact on steps that the GSEs will take in connection with the transition 

from LIBOR-indexed products to SOFR-indexed products.

The following disclaimer has been provided by London Stock Exchange Group plc (LSEG) and the GSEs 

take no responsibility for its contents: FTSE USD IBOR Cash Fallbacks are provided by London Stock 
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Exchange Group plc (“LSEG”) and its affiliates. LSEG and its affiliates shall not be liable for any errors or 

delays in providing or making available the data contained within this service or for any actions taken in 

reliance on the same. FTSE USD IBOR Cash Fallbacks cannot be used for any commercial purpose 

(including redistribution) without a license. Please contact LSEG D&A (formerly Refinitiv) if a license is 

required. FTSE USD IBOR Cash Fallbacks are subject to LSEG’s terms of use and disclaimer available at 

https://www.lseg.com/en/ftse-russell/benchmarks/usd-ibor-cash-fallbacks. 
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5. CMOs

5.1 Introduction

On December 22, 2022, the GSEs announced their selection of 30-day Average SOFR plus a fixed tenor 

spread adjustment as the benchmark replacement for their LIBOR-indexed CMOs following the 

cessation of LIBOR. This decision aligns with the Board-selected benchmark replacement for cash 

transactions that are FHFA-regulated-entity contracts and is applicable to CMOs for which the GSEs 

are responsible for selecting the benchmark replacement.

Certain CMOs issued following July 2020 may include contractual language indicating a benchmark 

replacement of Term SOFR. Please note that Fannie Mae and Freddie Mac will refrain from taking any 

steps that would result in the conversion of any existing SOFR-indexed CMOs from 30-Day Average 

SOFR to term SOFR based on any provision that calls for such conversion when operationally, 

administratively, and technically feasible.

The following section will help you understand:

• Key milestone dates for transitioning LIBOR-indexed CMOs

• Guidance on benchmark replacements and associated spread adjustments

• High-level considerations for transitioning legacy LIBOR-indexed CMOs

• Guidance on legacy LIBOR-indexed CMOs 

More information on the legacy transition can be found on Fannie Mae’s LIBOR Transition website and 

Freddie Mac’s Reference Rates Transition website.

5.2 Transition milestones

The GSEs defined key dates related to the transition of legacy LIBOR-indexed CMOs. Milestones will 

continue to be updated as necessary. Figure 5-1 identifies key transition milestones for CMOs.

Figure 5-1: CMO transition timeline

5.3 Replacement rate determination and spread methodology

❖ Benchmark replacement determination

The LIBOR Act required the Board to publish regulations identifying a Board-selected benchmark 

replacement based on SOFR. On December 16, 2022, the Board published its final rulemaking 

confirming the LIBOR replacement. Based on this, the GSEs will transition from 1-month LIBOR to the 

30-day Average SOFR rate published by the NY Fed, plus an applicable tenor spread adjustment
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(0.11448% for one month-tenor). 30-Day Average SOFR is published daily on the NY Fed’s website, 

and the all-in replacement rate can be calculated by pulling the applicable 30-Day Average SOFR rate 

and adding the 0.11448% tenor spread adjustment. The 30-Day Average SOFR rate that is available as 

of 3:00 p.m. ET should be used for calculations. 

The first date on which spread-adjusted 30-day Average SOFR rate will be used as the replacement 

index for Fannie Mae legacy CMO transactions will be July 21, 2023. The replacement index will be 

used for calculating accrued interest during July 25 – August 24, 2023 Accrual Period, and the 

payments will be made to bondholders on the August 25, 2023 Payment Date.

The first date on which spread-adjusted 30-day Average SOFR rate will be used as the replacement 

index for Freddie Mac CMO transactions will be July 13, 2023. The replacement index will be used for 

calculating accrued interest during the July 15 – August 14, 2023 Accrual Period, and the payments 

will be made to bondholders on the August 15, 2023 Payment Dat.

SOFR spread adjustment methodology

Under the LIBOR Act, a pre-determined fixed tenor spread adjustment will be applied to the 

benchmark replacement immediately following the cessation of LIBOR. Figure 5-2 depicts the LIBOR 

benchmark replacements and spread adjustment methodology for SF and MF CMOs as defined by the 

LIBOR Act.

For updates on regulatory and industry efforts to advance the legacy transition, refer to the Board's 

final rulemaking and ARRC’s website.

Figure 5-2: Benchmark replacement guidance for CMOs

Board Final 

Rule 

Category

Current 

LIBOR Index

Spread-adjusted SOFR 

Replacement Index

All-In Replacement Rate 

Calculation

FHFARegulatedEntity 

Contract

1M LIBOR 30-Day Average SOFR + 1-Month

Spread Adjustment

30-Day Average SOFR + 0.11448 

(percent)

5.4 Administering legacy LIBOR-indexed CMOs

❖ Actions to consider

Investors and vendors will need to maintain awareness of potential impacts of the LIBOR transition 

including index and calculation changes. The GSEs will transition from 1-month LIBOR to the 30-day 

Average SOFR rate published by the NY Fed, plus an applicable tenor spread adjustment (0.11448% for 

one month-tenor).

Fannie Mae has a few Collateralized Mortgage Obligations (CMOs) with interest rate caps or swaps that 

have corresponding derivatives. The corresponding derivatives for Single-Family and Multifamily CMO 

CUSIPs transitioned to the ISDA-recommended LIBOR replacement rate (this rate was also selected by 

the Federal Reserve Board as the replacement rate for derivatives transactions in its final rules), the 
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30-day Average SOFR calculated in arrears of the interest rate period.

As a result, there may be a mismatch between payments owed on the Fannie Mae CMOs and the 

derivatives beginning with the August 25, 2023 payment. Under certain circumstances, such a 

mismatch could result in lower payments on the derivative. Under those circumstances, this could 

result in lower or delayed payments on the CMO certificates. As specified in the relevant prospectus 

supplement, the guaranty from Fannie Mae does not apply to amounts owing on the derivative.

Figure 5-3: Actions to consider when Administering CMOs

Focus areas Actions to consider

Investor awareness ▪ Investors should maintain awareness of the updates to impacted CMOs

Use of a new index 

in rate and 

payment 

calculations

▪ Upon evaluation, update and test systems, reporting and other processes or 

activities related to interest rate adjustment calculations to incorporate the 

benchmark replacement as necessary
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9. Appendix: CMOs

9.1 Introduction

The ARRC endorsed SOFR as its recommended benchmark replacement to LIBOR in anticipation of the 

cessation of LIBOR.

To prepare for the cessation of LIBOR, the GSEs adopted a modified version of the ARRC securitization 

waterfall for new-issue LIBOR-indexed CMOs. The GSEs started offering SOFR-indexed CMOs for 

settlement in July 2020. Additionally, under the guidance of FHFA, Freddie Mac and Fannie Mae 

ceased offering new LIBOR-indexed CMOs for issuance. This includes resecuritizations of existing 

LIBOR-indexed CMOs (both Single-Family and Multifamily) and MBS/PCs into new-issuance LIBORindexed bonds effective June 30, 2022. The resecuritization of LIBOR-indexed CMOs and MBS/PCs into 

appropriately structured new-issue SOFR bonds will continue to be permitted.

9.2 Overview

The GSEs have structured new-issue Delay and Non-Delay SOFR-indexed CMOs that use 30-day 

Average SOFR published by the NY Fed as the reference rate, with a Determination Date of 2 Business 

Days (2BD) prior to the beginning of the accrual period for 45-, 55- and 75-day Delay and Non-Delay 

securities (same as current LIBOR-indexed CMOs).

Certain CMOs issued following July 2020 may include contractual language indicating a benchmark 

replacement of Term SOFR. Please note that Freddie Mac and Fannie Mae will refrain from taking any 

steps that would result in the conversion of any existing SOFR-indexed CMOs from 30-Day Average 

SOFR to Term SOFR based on any provision that calls for such conversion when operationally, 

administratively, and technically feasible.

9.3 Eligible collateral

For new-issue SOFR-indexed CMOs, the GSEs will accept all collateral that is currently acceptable for 

LIBOR-indexed structures at each respective entity. For more information on how collateral may be 

affected by the transition, refer to “Securitization of SOFR ARMs” in section 2.4, “Preparation for SF 

SOFR ARMs.”

9.4 Issuance

❖ Delay and Non-Delay (30-day Average SOFR)

The Determination Date for 45-, 55- and 75-day Delay and Non-Delay securities based on 30-day 

Average SOFR is 2BD prior to the beginning of the accrual period. This is the same as the practice that 

was used for LIBOR-indexed securities.

9.5 Administration

❖ Key updates for 45-day, 55-day and 75-day Delay CMOs

For 45-, 55- and 75-day Delay CMOs based on 30-day Average SOFR (or “Compounded SOFR” per the 

subsequent timelines), the Determination Date will be 2BD prior to the beginning of the accrual 

period. This is the same as for LIBOR-indexed CMOs, which also have a Determination Date of 2BD 
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prior to the accrual period (prior month). The graphics on the subsequent pages display the timing.
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Figure 9-1: 45-day Delay CMOs

Figure 9-2: 55-day Delay CMOs
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Figure 9-3: 75-day Delay CMOs

❖ Key updates for 45-day, 55-day and 75-day Non-Delay CMOs

For 45-, 55- and 75-day Non-Delay CMOs based on 30-day Average SOFR, the Determination Date will 

be 2BD prior to the beginning of the accrual period. This is the same as for LIBOR-indexed CMOs, 

which have a Determination Date of 2BD prior to their respective accrual periods (the 13th for 45-day, 

or the 23rd for 55-day) of the month preceding payment, or the 13th (75-day) of the second month 

preceding payment. The graphics on the subsequent pages display the timing.

Figure 9-4: 45-day Non-Delay CMOs
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Figure 9-5: 55-day Non-Delay CMOs

Figure 9-6: 75-day Non-Delay CMOs

9.6 Disclosure changes

❖ Key updates

Index rate disclosure files now contain a new column titled “Current Month Payment Indicator” which 

contains a “Y” if the rate applies to the current month’s payment factor calculation and an “N” if it 

does not.

CSS will publish index rate files on the first business day of the month (for all Delay securities), on the 
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15th of the month minus two business days (for Non-Delay 45- and 75-day securities), and on the 25th of 

the month minus two business days (for Non-Delay 55-day securities) at 6:30 p.m. ET; the previous 

schedule had the posting of files at 4:30 p.m. ET for Freddie Mac.

❖ Actions to consider

Discuss changes to disclosures with your disclosure vendor to ensure that your system can correctly 

apply the new “Current Month Payment Indicator” value.
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14. Summary of Prior Changes

Section Summary of changes

June 2020

4. Collateralized 

Mortgage Obligations

▪ Updated the date of the first SOFR-indexed CMO issuance from June 2020 to 

July 2020

▪ Changed the “Determination Date” to 2 Business Days (2BD) prior to the 

beginning of the accrual period

▪ Updated graphics to reflect a Determination Date of 2 BD prior to the beginning 

of the accrual period for 45-day, 55-day and 75-day delay and Non-Delay 

Compounded SOFR-indexed securities (per investor deck)

August 2020

4. Collateralized 

Mortgage Obligations

▪ Updated language to reflect that Fannie Mae and Freddie Mac are now issuing 

SOFR-indexed CMOs

September 2020

4. Collateralized 

Mortgage Obligations

▪ Updated to indicate that the cessation will not apply to RCR/MACR exchange or 

resecuritizations of previously issued LIBOR-indexed certificates (whether CMO 

or ARM certificates) as long as such resecuritizations do not increase the 

exposure of LIBOR-indexed certificates

October 2020

4. Collateralized 

Mortgage Obligations

▪ Updated language to indicate that Freddie Mac and Fannie Mae have ceased 

offering new LIBOR-indexed CMOs for issuance

▪ Updated the graphs in the administration section to indicate that LIBOR is no 

longer the current state and Compounded SOFR is no longer a hypothetical 

implementation

November 2020

4. Collateralized 

Mortgage Obligations

▪ Added language on SOFR-indexed CMOs, transitioning from 30-day Average 

SOFR to Term SOFR, when Term SOFR becomes available

October 2021

4. Collateralized 

Mortgage Obligations

▪ 4.2 Overview: Updated information related to Term SOFR; added language 

about the determination of the administrative feasibility of Term SOFR

▪ 4.7 Approach for transition legacy CMOs: Added language about the 

determination of the administrative feasibility of Term SOFR

June 2022

4. Collateralized 

Mortgage Obligations

▪ Updated language to reflect the cessation of resecuritizing existing LIBORindexed Single-Family and Multifamily CMOs and MBS/PCs into new-issuance 

LIBOR-indexed bonds

January 2023

5. CMOs

▪ Moved CMO details to section 5

▪ Added consolidated transition milestone timeline

▪ Updated content throughout to describe the replacement rate determination 

and other details related to the transition of LIBOR-indexed CMOs

▪ Clarified plan to keep all SOFR-indexed CMOs indexed to 30-Day Average SOFR
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April 2023

3. CMOs ▪ Updated index description and all-in replacement rate calculation information 

in Section 5.3