SOFR ARMs Fact Sheet

November 2022

The Secured Overnight Financing Rate (SOFR) is based on actual transactions in the Treasury repurchase (repo) market, one of the largest 

markets in the world. This is the market where investors offer borrowers overnight loans backed by their U.S. Treasury bond assets. 

The Alternative Reference Rates Committee (ARRC) has selected SOFR as the preferred alternate index for U.S. dollar-denominated 

London Interbank Offered Rate (LIBOR) contracts. SOFR is based on actual transactions in a market where extensive trading happens 

every day, whereas LIBOR is based on an average of estimates of interbank offered rates in the London market provided by a panel of 

global banks surveyed by the Intercontinental Exchange. SOFR complies with the governance standards of the International Organization 

of Securities Commissions (IOSCO). 

The Federal Reserve Bank of New York (New York Fed) began publishing SOFR in April 2018 as part of the effort to replace LIBOR. The 

New York Fed, as administrator of SOFR and in cooperation with the Treasury Department’s Office of Financial Research, began 

publishing 30-, 90- and 180-day Average SOFR as well as an overnight SOFR index rate. These indices are available here. For their newly 

originated Single-Family SOFR ARMs, Freddie Mac and Fannie Mae (the GSEs) require the use of the 30-day Average SOFR, which the 

New York Fed began publishing on March 2, 2020.

Potential users of the SOFR Averages and Index can subscribe here to receive alerts and updates from the New York Fed.

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General Requirements

• 3/6-month, 5/6-month, 7/6-month and 10/6-month SOFR-indexed ARMs. 

• For all SOFR-indexed ARMs, the margin must be equal to or greater than 100 basis points and less than or equal to 300 basis points.

Transaction Type Credit Fees

• Purchase

• “No cash-out” refinance

• Cash-out refinance

• Credit Fees may apply based on the 

individual characteristics of the mortgage. 

See Single-Family Seller/Servicer 

Guide (Guide) Exhibit 19 for details on 

applicable fees.

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Learn more about LIBOR-SOFR

• Review Guide Sections 4401.2 through 

4401.5 and 4401.8 for ARM eligibility 

requirements related to SOFR-indexed 

ARMs and Section 4401.9 and Exhibit 

19, Credit Fees, for information on the 

ARM Credit Fees applicable to the sale 

of certain ARMs and other Credit Fees.

• Read Guide Bulletin 2020-1

and 2020-9

• Visit the Uniform Instruments 

web page.

• Contact your Freddie Mac 

representative.

• Call the Customer Support Contact 

Center at (800-FREDDIE).

Eligible Mortgages

• Home Possible® mortgages may be 7/6-month and 10/6-month ARMs; 5/6-month 

ARMs are allowed if secured by a property other than a manufactured home.

• Financed permanent buydown mortgages may be 5/6-month, 7/6-month and 10/6-month ARMs. 

• Construction conversion mortgages and renovation mortgages.

• Manufactured homes may be 7/6-month and 10/6-month ARMS.

• Investment property mortgage may be a 3/6-month, 5/6-month, 7/6-month or 10/6-month ARM, however if the borrower owns more than one

financed investment property, the investment property adjustable-rate mortgage sold to Freddie Mac must be a 7/6-month or 10/6-month ARM.

• CHOICEHome® may be 5/6-month, 7/6-month and 10/6-month ARMs.

• CHOICERenovation®

• GreenCHOICE Mortgages®

• Super conforming mortgages may be 5/6-month, 7/6-month and 10/6-month ARMs. 

Maximum LTV Ratios 

• See Guide Section 4203.4.

Underwriting Path

•

SOFR-indexed ARMs may be submitted to Loan Product Advisor® (LPASM) or manually 

underwritten. 

Property Type/Eligible Properties

• 1- to 4-unit primary residences

• Second homes

• 1- to 4-unit investment properties

Execution and Delivery Requirements

• Sellers have been able to take out 30-day Average SOFR Cash Contracts in Loan Selling Advisor® to deliver SOFR-indexed ARMs since November 16, 

2020.

• Sellers have been able to take out 30-day Average SOFR guarantor contracts in Loan Selling Advisor to deliver mortgages into a WAC ARM PC beginning 

on November 16, 2020, for mortgages with settlement dates since December 1, 2020.

• See Guide Section 6302.7(b) for special delivery instructions for SOFR-indexed ARMs.

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