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LIBOR Transition FAQs

Single-Family Adjustable Rate Mortgages (ARM)

Under the guidance of FHFA, Fannie Mae and Freddie Mac are providing jointly prepared answers to frequently 

asked questions related to the GSEs’ respective transitions away from LIBOR-indexed products to SOFR-indexed 

products. The Enterprise section answers high-level questions applicable to all products followed by Q&A sections 

specific to Single-Family adjustable-rate mortgages and PCs/MBS, Credit Risk Transfer transactions, Multifamily 

adjustable-rate mortgages and securities, Credit Risk Transfer transactions, and Collateralized Mortgage 

Obligations.*

Please be aware that the federal Adjustable Interest Rate (LIBOR) Act (LIBOR ACT) became law on March 15, 2022. 

As required by the Act, the Board of Governors of the Federal Reserve System (Federal Reserve Board) published

regulations identifying benchmark replacement rates based on SOFR on December 16, 2022. The regulations 

published by the Federal Reserve Board were used as guidance for the answers provided by Fannie Mae and 

Freddie Mac in this document.

*Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; 

instead, all information, content, and materials available on this site are for general informational purposes 

only. Information on this website may not constitute the most up-to-date legal or other information. This website 

contains links to third-party websites. Such links are only for the convenience of the reader, user or browser; 

Fannie Mae and Freddie Mac do not recommend or endorse the contents of the third-party sites.

Readers of this website should contact their attorney to obtain advice with respect to any particular legal 

matter. No reader, user, or browser of this site should act or refrain from acting on the basis of information on 

this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney 

can provide assurances that the information contained herein – and your interpretation of it – is applicable or 

appropriate to your particular situation. Use of, and access to, this website or any of the links or resources 

contained within the site do not create an attorney-client relationship between the reader, user, or browser and 

website authors, contributors, contributing law firms, or committee members and their respective employers.

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

no responsibility for its contents: FTSE USD IBOR Cash Fallbacks are provided by 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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Summary of Changes

The table below details the list of changes since the June 2023 version of the FAQs published on the Fannie Mae and Freddie 

Mac websites.

Section Summary of change

December 2023

Contents Updated disclaimer language to reflect FTSE and LSEG instead of Refinitiv

Single-Family AdjustableRate Mortgages (ARMs)Q.22 Updated table to reflect naming change to USD IBOR Consumer Cash Fallback 

indices (from “Refinitiv” to “FTSE”)
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Single-Family Adjustable-Rate Mortgages (ARMs)

Q1. Is there an impact to Uniform Mortgage-Backed Securities (UMBS)?

No. UMBS are backed only by fixed-rate loans.

Q2. Can lenders still sell LIBOR-indexed Single-Family ARMs to the GSEs?

No. Effective January 1, 2021, the GSEs no longer purchase LIBOR ARMs.

Q3. What are the Single-Family SOFR ARM subtypes and prefixes?

The Single-Family SOFR ARM prefixes were communicated in Fannie Mae Lender Letter LL-2020-012 and 

Freddie Mac Bulletin 2020-9. In addition, the Fannie Mae Prefix Glossary, the Fannie Mae ARM MBS 

Subtypes, and the Freddie Mac Prefix Library (for Freddie Mac 75-day prefixes) have been updated. Please 

see the subtypes and prefixes on p.19 of the SF Chapter in the Enterprise LIBOR Transition Playbook

(Playbook).

Q4. What SOFR rate is being used and where is the rate available for newly issued Single-Family SOFR-indexed 

ARMs?

The GSEs currently are using the 30-day Compound Average SOFR, which the New York Fed began 

publishing on March 2, 2020 on its website. Servicers are to use the rate published by the New York Fed on 

the same day as the SOFR-indexed ARM’s lookback date when setting the adjusted interest rate and related 

monthly principal and interest payment.

Q5. Why are the reset periods pegged at six months instead of traditional one-year reset?

With the shift to using a 30-day Compound Average SOFR in our new products, the ARRC white paper 

discusses how a 6-month reset would help mitigate the potential mismatch between the loan rate set in 

advance based on historical averages of SOFR relative to future changes in market interest rates.

Historical data indicates that an average of the overnight rate with a 6-month reset period is more 

comparable to subsequent movements in interest rates than LIBOR with an annual reset period.

Q6. Since the periodic reset period is six months, does this imply that there will be a 6-month term SOFR?

For the new SOFR-indexed ARM product, the index is the 30-day Average SOFR and the rate reset period is 

six months. The six-month rate reset period is unrelated to whether a Single-Family ARM product indexed 

to term SOFR will eventually be developed. The Enterprises do not have any plans to develop a SingleFamily ARM product indexed to term SOFR. See Enterprise FAQ #14.

Q7. How are the SOFR and the 30-Day Compound Average SOFR rates calculated? 

Please visit the New York Fed’s website for detailed information about how the SOFR Rate is calculated. For

information on how the 30-day Compound Average SOFR is calculated, click here. 
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Q8. Why is the periodic reset cap one percentage point?

The change ofthe reset period from a 12-month periodic reset to a 6-month periodic reset created the need 

to lower the periodic reset cap. This safeguards against unexpected payment increases and remains

consistent with current market practices. As a result, even in a period of rapidly rising interest rates, a 

borrower’s payment would not change by more than two percentage points a year – which is the prevailing 

market convention.

Q9. How is the lifetime floor determined since this is a field in the note that the Seller needs to populate?

Fannie Mae’s Selling Guide and Freddie Mac’s Single-Family Seller/Servicer Guide each dictate that the 

lifetime floor must equal the initial mortgage margin, which must be populated in the applicable fields in 

the note. Once set at origination, the lifetime floor will not change over the life of the loan.

Q10. What is the mortgage margin for new SOFR-indexed ARM offerings?

The new SOFR-indexed ARM products have a maximum mortgage margin of 3.00%. The ARRC recommends 

a mortgage margin between 2.75% and 3.00%.

Q11. Where can consumers find more information on SOFR-indexed ARMs and program disclosures?

The CFPB website contains up to date information on program disclosures as well as information on ARMs. 

It can be accessed here.

Q12. Do the GSEs use a 45-day lookback period for SOFR-indexed hybrid ARMs to determine the 30-day 

Average SOFR rate?

Yes, we use a 45-day lookback period.

Q13. Do the GSEs offer an assumability option for the SOFR-indexed ARM offerings?

Yes. SOFR-indexed ARM Notes and Riders that provide for assumption during the adjustable-rate period 

following the fixed rate period of the ARM are currently available.

Q14. When will the GSEs’ respective systems be updated to reflect SOFR-indexed ARMs?

All systems have been updated to support new SOFR-indexed ARMs. As of August 3, 2020, Fannie Mae 

provided lenders with the ability to sell and/or securitize Single-Family SOFR-indexed ARMs. As of 

November 9, 2020, Freddie Mac provided lenders with the ability to sell and/or securitize Single-Family 

SOFR-indexed ARMs. 
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Q15. Did the GSEs make additional changes under the Uniform Mortgage Data Program (UMDP)?

The GSEs made updates to account for SOFR-indexed ARMs in the applicable UMDP datasets. See the joint 

announcement (Fannie Mae: UMDP announcement) (Freddie Mac: UMDP announcement) where the 

changes to the UMDP datasets were communicated.

Q16. Are SOFR-indexed ARMs available for cash and guarantor execution?

Yes. Sellers can deliver SOFR-indexed ARMs through cash or guarantor executions. 

Q17. Why were the Single-Family LIBOR ARM Notes and Riders updated on February 5, 2020?

The GSEs updated the Single-Family LIBOR ARM Notes and Riders to reflect the fallback language that the 

ARRC recommended in preparation for the potential cessation of LIBOR.

While legacy Single-Family ARM contract language allows the GSEs and other noteholders to replace the 

LIBOR index, it does not provide specific guidance on how to make such a replacement. The ARRC’s 

recommended fallback language is more robust because it clearly specifies what borrowers and investors 

should expect regarding when and how a replacement index will be chosen.

Q18. Were only the LIBOR Single-Family ARM Notes and Riders updated in February 2020 to include the 

ARRC recommended fallback language?

No. All GSE Single-Family ARM Notes and Riders were updated in February, not just LIBOR-indexed ARM 

Notes and Riders. In addition, on April 1, 2020, the GSEs published SOFR-indexed Single-Family ARM Notes 

and Riders that include the ARRC recommended fallback language. Currently, the only ARMs that the GSEs 

purchase are SOFR-indexed Single-Family ARMs.

Q19. Why was term SOFR not used for the new ARM product?

In April of 2020, the GSEs were tasked with creating a SOFR-indexed ARM offering using available rates. 

Accordingly, we designed the ARM offering using the existing 30-day Average SOFR, as published by the 

New York Fed. Term SOFR was not available at this time. The availability of term SOFR rates does not impact 

the 30-day Average SOFR ARM product. The GSEs do not have any plans to develop a Single-Family ARM 

product indexed to term SOFR.

Q20. Since there is not a specific mortgage margin associated with the SOFR ARM product, can loans with different 

mortgage margins be securitized in the same Fannie Mae MBS / Freddie Mac PC?

Yes, loans with varying mortgage margins may be securitized in the same Fannie Mae MBS / Freddie Mac 

PC or delivered into whole loan commitments.

Q21. Can the initial fixed rate on a SOFR ARM be lower than the mortgage margin?

Yes. However, the initial fixed rate cannot be lower than the margin minus the initial reset cap. For example, 

for a 5 year/6-Month SOFR-indexed ARM with a 3% margin and a 2% initial reset cap, the initial fixed rate 
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cannot be lower than 1% (3% margin – 2% reset cap) during the first 5 years when the interest rate is fixed. 

Please note that the lifetime floor, which must equal the initial mortgage margin, only applies during the 

adjustable-rate period. If the initial mortgage margin is 2.5% and the initial rate during the fixed-rate period 

is 1%, the lifetime floor for the interest rate is 2.5%, but that floor only applies during the life of the 

adjustable-rate period, not during the initial fixed-rate period.

Q22. Have you chosen a replacement index for Single-Family legacy LIBOR-indexed ARMs? 

The Federal Reserve Board adopted final regulations on December 16, 2022 to implement the LIBOR Act. 

Consistent with the Federal Reserve Board’s regulations and FHFA guidance, the GSEs will use the spreadadjusted term SOFR reference rates for consumer products to be published by LSEG and subject to a oneyear transition period. The transition will occur immediately following the June 30, 2023 cessation of the 

publication of all remaining tenors of USD LIBOR by ICE Benchmark Administration Limited.

For consumer loans (Single-Family ARMs), the applicable LIBOR index will be replaced by the Federal 

Reserve Board selected benchmark replacement rates as follows:

1-month, 6-month and 1-Year LIBOR Indexes will be replaced by the applicable Term SOFR + the transition 

tenor spread adjustment. Different spread adjustments will apply for each tenor of LIBOR. The tenor spread 

adjustment is subject to a one-year phase-in period.

LIBOR Index 1-Month 6-Month 1-Year

LSEG Public Replacement 

Index Name

FTSE USD IBOR 

Consumer Cash 

Fallback 1-Month 

FTSE USD IBOR 

Consumer Cash 

Fallback 6-Month 

FTSE USD IBOR 

Consumer Cash 

Fallback 12-Month 

Refinitiv Instrument Code 

(RIC)**

USDCFCFCTSA1M= USDCFCFCTSA6M= USDCFCFCTSA1Y=

Replacement Index Details 1M CME Term SOFR 

+

Transition Tenor 

Spread Adjustment

6M CME Term SOFR 

+

Transition Tenor 

Spread Adjustment

12M CME Term SOFR 

+

Transition Tenor 

Spread Adjustment

Rate All-In All-In All-In

Feature No Floor No Floor No Floor

** When Servicers access the historical rates published by LSEG, the index reflected by the RIC in this table 

represents the “all-in,” “no floor” replacement index.

Q23. Where are the replacement indices published for Single-Family legacy LIBOR-indexed ARMs?

Refinitiv was selected by the ARRC to administer and publish the USD LIBOR consumer cash fallback rates. 

LSEG (formerly Refinitiv) began publishing prototype fallback rates on September 21, 2022. The applicable 

“all-in,” “no floor” replacement index will be available on the LSEG USD IBOR Consumer Cash Fallbacks 

Summary website after June 30, 2023 on a one-day delayed basis similar to the one-day delayed publication 

of LIBOR rates in the Wall Street Journal. Historical USD LIBOR cash fallback rates are also available on 

LSEG’s website.
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Q24. Should Single-Family Servicers implement the SOFR-based replacement index using the one-day publication 

delay protocol currently in use for LIBOR-indexed ARMs?

Yes. Currently, the Wall Street Journal publishes LIBOR indices on the day after their release by ICE

Benchmark Administration Limited, the source for LIBOR indices. For those Single-Family LIBOR-indexed 

ARMs with a lookback date of Monday, July 3, 2023, Servicers should use the LIBOR index published in the 

Wall Street Journal on Monday, July 3, which we expect will include the notation “Rates shown are effective 

6/30/23”. If the lookback date occurs on July 4, 2023 or later, then the Servicer should use the applicable 

SOFR-based replacement index noted in FAQ Q22 and published by LSEG. Similar to the Wall Street Journal

publication process, LSEG will post consumer cash fallback rates on a one-day delayed basis on its publicly 

available website here. Servicers should continue to use their current index updating processes with 

respect to one-day delayed publication in determining the appropriate published replacement index when

applying changes to the interest rate and related monthly P&I payment.

Q25. What if I have LIBOR ARM Notes that have different index replacement language than the Fannie Mae/Freddie 

Mac Uniform Adjustable-Rate Notes?

Most Single-Family (consumer) LIBOR ARM Notes contain standard index replacement language stating that 

“If the Index is no longer available, the Note Holder will choose a new index which is based upon 

comparable information.” Some servicers may be servicing legacy LIBOR loans that were closed on 

documents with different language relating to replacing the index. The GSEs have required their LIBOR ARM 

servicers to identify loans closed on such documents (non-standard documents) that provide for variations 

in selecting a replacement index or have no replacement index language, and to bring those loan provisions 

to the applicable GSE’s attention as soon as possible. This requirement includes loans that require other 

Servicing data changes, such as changes to the mortgage margin, upon transition to the replacement index. 

There may be operational or other impacts based on the criteria prescribed in these non-standard 

documents. Servicers should work with their designated point(s) of contact at either GSE to work through 

next steps on how to resolve identified non-standard notes.

Q26. Will there be any changes to the reset period, margin, lookback period, lifetime caps/floors and/or 

periodic rate cap?

Most standard LIBOR ARM Notes do not provide for a change in the reset period, margin, lookback period, 

lifetime caps/floors and/or periodic rate cap upon the implementation of the change in index. Per Freddie 

Mac Servicer Bulletin 2022-12 and Fannie Mae June 6, 2022 Announcement (and FAQ Q25), Servicers were 

required to review their LIBOR notes to confirm if there are any loans originated on notes that includes 

non-standard index replacement index language and/or language that requires other servicing loan data to 

be updated at the time of transitioning to replacement index (e.g., margin). For such notes, we requested 

a copy of each variation for review and for Servicers to await instructions on how to transition such notes.

Q27. Could Single-Family LIBOR-indexed ARMs become fixed rate? 

No. After June 30, 2023 when LIBOR is no longer available/published, LIBOR-indexed ARMs will be 

transitioned to the variable, spread-adjusted CME term SOFR reference rates published by LSEG consistent 

with the Federal Reserve Board’s regulation implementing the LIBOR Act.

Q28. What does the legacy Single-Family ARM fallback language say?

In many cases for loans owned by the GSEs, Fannie Mae’s and Freddie Mac’s legal documents allow for the

applicable noteholder to choose a comparable alternative rate should the prevailing reference rate cease 
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to exist. At the loan-level, the contract language determines the key decision-maker concerning the 

replacement index. Our uniform instrument (the Single-Family ARM note) contains a provision that, if an 

index becomes unavailable, we (as noteholder) have the authority and obligation to choose a successor 

index. The language is also described in the Fannie Mae Single-Family MBS Prospectus and Freddie Mac PC

Offering Circular under ARM Indices.

The GSEs published updates to joint Fannie Mae/Freddie Mac uniform ARM notes and riders to incorporate 

the ARRC's recommended fallback language for newly originated ARMs. In our respective April 1, 2020 

announcements, the SOFR-indexed ARM uniform notes with the ARRC fallback language were made 

available.

Q29. What are the options for individual borrowers with LIBOR ARMs?

As always, individual borrowers can choose to keep their LIBOR-indexed ARMs and proceed with the

transition, seek to refinance into a fixed-rate or non-LIBOR-based product, or pay off their mortgage. For 

borrowers who choose to keep their LIBOR-indexed ARMs, servicers of GSE-owned loans will inform 

borrowers of the replacement index to be used on the LIBOR-indexed ARMs following the June 30, 2023 

cessation of the publication of all remaining tenors of USD LIBOR by ICE Benchmark Administration Limited

as per the details provided in Q22 and Q28. 

Q30. Can Servicers provide disclosures to Borrowers based on the replacement index?

Until such time as both LIBOR becomes unavailable and a replacement index is chosen, we note that the 

CFPB has issued LIBOR Transition FAQs that indicate that borrower notices under Regulation Z “must reflect 

the legal obligations of the consumer and creditor when the disclosures are provided.” CFPB LIBOR 

Transition FAQs, Adjustable-Rate Mortgage Products, Question 10. Servicers should consult with counsel 

to ensure they provide accurate notices to borrowers prior to the legally effective change to the 

replacement index and in accordance with the terms of the Note. At a minimum, such notices should be 

sent on or after July 1, 2023 and prior to the related interest rate change date that sets the new interest 

rate based on the replacement index. However, the CFPB FAQs also state that servicers may provide 

additional information to borrowers about the LIBOR transition in addition to required regulatory 

disclosures. 

Q31. Will the GSEs be providing Servicers a template to use for borrower notification?

The GSEs will not be providing a template for borrower notification; however, there are borrower 

notification templates available. For further information, Servicers may refer to the ARRC’s LIBOR ARM 

Transition Resource Guide, which includes links to the following resources provided by the Mortgage 

Bankers Association since April 2021:

Mortgage Bankers Association (MBA) 

• MBA LIBOR Resources webpage

• Press Release: MBA Releases Templates for Servicer Communications with Existing ARM Borrowers in 

Preparation for LIBOR Expiration – April 26, 2021 

• MBA Borrower Communication Template for Existing LIBOR ARMs (Notice) 

• MBA Borrower Communication Template for Existing LIBOR ARMs (Letter)
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Q32. Will the Life Ceiling Interest Rate or Life Floor Interest Rate on a SF ARM and MBS/PC adjust due to the LIBOR 

transition? 

No. The Life Ceiling Interest Rate and Life Floor Interest Rate on a SF ARM and MBS/PC will remain at the 

same levels both before and after the transition. The new index is intended to comparably replicate the 

behavior of LIBOR index and, therefore, a change to Life Ceiling Interest Rate and Life Floor Interest Rate 

structure is not necessary.

Q33. Why did you retire the CMT ARM offerings – it appears the CMT index will continue to be published?

Under the guidance of FHFA, we retired the CMT ARM products in 2021. Our regulator prefers that we only 

use robust, IOSCO-compliant rates in current product offerings. In Fannie Mae Lender Letter LL-2021-05

and Freddie Mac Bulletin 2021-4, we announced that the GSEs will no longer purchase any CMT-indexed 

ARM that has an Application Received Date of July 1, 2021 or later. In addition, the GSEs will no longer 

purchase CMT-indexed ARMs on and after October 1, 2021, regardless of the Application Received Date or 

Note Date.
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Summary of Prior Changes

Section Summary of change

July 2020

Single Family ARMs Q3. Added link to the SF Chapter in the Playbook 

for easy reference.

Q21. Added language to clarify where the fall 

back language applies.

August 2020

Single Family ARMs Q24 and Q25. Added as new questions.

September 2020

Single-Family 

Adjustable-Rate 

Mortgages (ARMs)

Q7. replaced “adjustment” with ”reset”

Q8, Q9 and Q25. Added the word mortgage 

before margin

October 2020 

Single Family Adjustable 

Rate Mortgages (ARMs)

Q14. Updated language to reflect that Loan 

Product Advisor is now available as of 10/1/2020 

for underwriting of SOFR-based ARMs. 

December 2020

Single Family Q2, Q4, Q5 and Q6. Minor edits.

Q7. Added a new question on how 30-day SOFR 

is calculated.

Q20. Updated language to reflect December 

announcement on legacy replacement index.

April 2021

SF ARM Q2. Updated to reflect that GSEs no longer 

acquire LIBOR ARMs

Q3, Q5, Q13, Q15, Q20, and Q27: cosmetic 

updates only

Q7. Reworded existing information only

Q14. Update to reflect that all systems have been 

updated to support SOFR-indexed ARMs

Q16 and Q17. Updated to past tense and 

removed the second sentence in the response to 

Q17 because it is no longer applicable

Q22 and Q25. Updated to add reference to CFPB 

LIBOR Transition FAQs

Q24. Updated to add announcement of specific 

CMT-indexed ARM 2021 retirement dates

Q27. Updated FAQ to clarify initial fixed rate and 

mortgage margin

Q28. New FAQ to address Borrower Disclosures 

from Servicers

October 2021

Single Family Q23. Updated Q&A to address usage of TermSOFR
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Section Summary of change

June 2022

Single Family ARMs Q15 (from prior publication). Deleted, as the 

question is now outdated. 

Q19. Updated to incorporate Adjustable Interest 

Rate (LIBOR) Act update.

Q20: Question added to reference Servicer Note 

Review

January 2023

Single Family ARMs Q22. Updated to state the GSEs' legacy LIBOR 

replacement rate selections for SF ARMs.

Q23. Question added to state the location of the 

published replacement rates for legacy SF ARMs.

Q25. Updated to incorporate the FRB’s final 

regulation for the LIBOR Act.

Q27. Updated language regarding options for 

borrowers with LIBOR ARMs.

Q28. Updated references to CFPB LIBOR 

Transition FAQs.

April 2023

Single-Family ARMs Q22. Refinitiv Public Replacement Index Names 

and Refinitiv Instrument Codes (RICs) updated.

Q24. FAQ added: “Should Single-Family Servicers 

implement the SOFR-based replacement index 

using the one-day publication delay protocol 

currently in use for LIBOR-indexed ARMs?"

Q26. FAQ added: “Will there be any changes to the 

reset period, margin, lookback period, lifetime 

caps/floors and/or periodic rate cap?”

Q31. FAQ added: “Will the GSEs be providing 

Servicers a template to use for borrower 

notification?”

Q32. FAQ added: “Will the Life Ceiling Interest Rate 

and Life Floor Interest Rate on a SF ARM and 

MBS/PC adjust upward by the value of the fixed 

tenor adjusted spread with the transition of the 

index interest rate to the new all-in replacement 

rate?”

June 2023

Single-Family ARMs Q23. Updated language regarding Refinitiv 

posting consumer cash fallback rates on a one-

day delayed basis.

Q24. Updated the first lookback date that 

Servicers should be using SOFR replacement rates 

to July 4, 2023, as a result of Refinitiv posting 

consumer cash fallback rates on a one-day 

delayed basis.