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LIBOR Transition FAQs

Collateral Mortgage Obligations (CMO)

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

Collateral Mortgage 

Obligations (CMOs)

Q.10 Added question explaining Fannie Mae CMO bond scenarios where the derivative 

(interest rate cap) and the CMO bond transitioned to different fallback rates
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Collateral Mortgage Obligations (CMOs)

In these FAQs, “new SOFR-indexed CMOs” and “new issue SOFR-indexed CMOs” generally refer to SOFRindexed CMOs issued by the Enterprises beginning in July 2020.

Q1. When were new SOFR-indexed CMOs available for issuance?

Freddie Mac and Fannie Mae began to offer new SOFR-indexed CMOs for REMIC settlements in July 2020. 

The GSEs ceased offering new LIBOR-indexed CMOs on September 30, 2020. The cessation does not apply 

to RCR/MACR exchanges, or halt resecuritizations of previously issued LIBOR-indexed certificates (whether 

CMO or ARM certificates) into appropriately structured new-issue SOFR-indexed CMOs. Prior limitations on 

resecuritizing existing LIBOR-indexed CMOs into new-issue SOFR-indexed re-REMICs will no longer apply 

once the index for existing LIBOR CMOs has transitioned on June 30, 2023 into a Federal Reserve Boardselected benchmark replacement based on SOFR.

Q2. What is the determination date for Delay and Non-delay securities using the NY Fed published 30-day 

Average SOFR Rate?

All SOFR-indexed 45-day, 55-day and 75-day Delay and Non-Delay securities have a determination date of 2 

business days (2BD) prior to the beginning of the accrual period.

Q3. What collateral is eligible to be included in a SOFR-indexed CMO?

For new issue SOFR-indexed CMOs, the Enterprises accept all collateral that was acceptable for LIBORindexed structures at each respective Enterprise.

Q4. Will the new issue SOFR-indexed CMOs transition from 30-day Average SOFR to Term SOFR? 

New-issue CMOs indexed to NY Fed published 30-day Average SOFR will not include language allowing an 

optional transition to Term SOFR. Outstanding CMOs indexed to NY Fed published 30-day Average SOFR 

that include optional transition language will also not transition to Term SOFR.

Q5. How will you treat legacy LIBOR-indexed CMOs?

The Federal Reserve Board is implementing the Adjustable Interest Rate (LIBOR) Act which was signed into 

law in March 2022. The final regulations on the replacement rates were announced by the Federal Reserve 

Board on December 16, 2022. Consistent with the Federal Reserve Board’s regulation, the GSEs will 

transition to the 30-day Average SOFR rate published by the Federal Reserve Bank of New York, plus an 

applicable tenor spread adjustment. The transition will occur following the June 30, 2023, cessation of the 

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

table in Q12 of the Enterprise section for more details.

Q6. When is the last time that the GSEs will use the 1-month LIBOR benchmark for legacy CMOs?

Any legacy CMO with a determination date on or before 6/30/2023 will use the LIBOR rate published on 

that determination date.
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Q7. When is the first time that the GSEs will use the spread-adjusted 30-day Average SOFR rate as a

replacement for the LIBOR benchmark for legacy CMOs?

Any legacy CMO with a determination date after 6/30/2023 will use the 30-day Average SOFR rate published 

on that determination date, with the 1 month spread adjustment added to the rate.

Q8. With the transition of legacy CMOs after 6/30/2023, will there be any other changes regarding how the 

accrued interest will be calculated and paid in the future, such as the benchmark adjustment date, accrual 

period, payment date, and day count convention, etc.?

After the transition, the benchmark adjustment date, accrual period, payment date, and the day count 

convention will stay the same. The GSEs will change the time at which the benchmark will be determined. 

On a benchmark adjustment date, the time that the spread-adjusted 30-day Average SOFR rate is 

determined will be 3:00 pm (New York City time), instead of 11:00 am (London time) as for 1-month LIBOR. 

This would make it consistent with the time at which the 30-day Average SOFR rate is determined for 

existing SOFR-indexed CMOs. 

Q9. What spread adjustment will be used for legacy CMOs after LIBOR cessation on 6/30/2023?

Per the LIBOR Act and Fed’s final rule, the spread adjustment will be 11.448 bps for the 1-month tenor, thus 

the spread adjustment will be fixed at 11.448 bps after 6/30/2023 for legacy CMOs that were indexed to 1-

month LIBOR. After transition, the spread-adjusted 30-day Average SOFR rate will replace the 1-month 

LIBOR benchmark for legacy CMO transactions.

Q10. What if I have a Fannie Mae CMO bond with an interest rate cap where the derivative and the CMO 

bond transitioned to different fallback rates (Fannie Mae only).

There are a few Fannie Mae Collateralized Mortgage Obligations (CMOs) with interest rate caps 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 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 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. 
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Summary of Prior Changes

Section Summary of change

June 2020

Collateralized Mortgage 

Obligations (“CMOs”)

Q1. Updated the SOFR-indexed CMO issuance 

from June 2020 to July 2020;

Q2. For both Delay and Non-delay securities, 

updated the determination date to be 2 Business 

Days (2BD) prior to the beginning of the accrual

period;

Q4. Clarified the entities referred as “appropriate 

regulatory authority”

Q5. Updated language to note the May 28, 2020

announcements;

Q6. Removed question as it is no longer 

applicable.

October 2020 

Collateral Mortgage 

Obligations (CMOs)

Q5. Updated the language on replacement index 

for legacy products and intentions for LIBOR-

indexed CMOs.

April 2021

CMO Q1. Updated to reflect that SOFR-index CMOs 

have been issue.

Q2. Updated to reflect that determination date 

has been determined

Q3. Updated to reflect the same collateral 

acceptable for LIBOR-indexed CMOs can be 

included in SOFR-indexed CMOs

October 2021

Collateral Mortgage 

Obligations (CMOs)

Q3. Added language that transition to Term 

SOFR for new issue CMOs will depend on ARRC 

recommendation that use of rate is appropriate 

for CMOs 

Q4. Added language that treatment of transition 

to Term SOFR for legacy CMOs will depend on 

GSE evaluation and ARRC recommendation that 

use of rate is appropriate for CMOs

June 2022

Collateral Mortgage 

Obligations (CMOs)

Q1. Updated to incorporate information from the 

resecuritization announcement on May 12, 2022. 

January 2023

Collateral Mortgage 

Obligations (CMOs)

Q1. Updated to state that limitations on 

resecuritizing existing LIBOR-indexed CMOs into 

new-issue SOFR-indexed re-REMICS will no longer 

apply following LIBOR cessation on June 30, 2023.

Q4. Updated to state that new issue SOFR-indexed 
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Section Summary of change

CMOs will not transition to Term SOFR.

Q5. Updated to state the GSEs' legacy LIBOR 

replacement rate selections for CMO products.

April 2023

Collateral Mortgage 

Obligations (CMOs)

Q6. FAQ added: “When is the last time that the 

GSEs will use the 1-month LIBOR benchmark for 

legacy CMOs?”

Q7. FAQ added: “When is the first time that the 

GSEs will use the spread-adjusted 30-day Average 

SOFR rate as a replacement for the LIBOR 

benchmark for legacy CMOs?”

Q8. FAQ added: “With the transition of legacy 

CMOs after 6/30/2023, will there be any other 

changes regarding how the accrued interest will 

be calculated and paid in the future, such as the 

benchmark adjustment date, accrual period, 

payment date, and day count convention, etc.?”

Q9. FAQ added: “What spread adjustment will be 

used for legacy CMOs after LIBOR cessation on 

6/30/2023?”