Client Alert: Negotiating Variable Rate Mortgage Loans as LIBOR Phases Out

LIBOR panel banks and regulators are working on a plan for a transition to alternate benchmarks by the end of 2021. At this point, a large chunk of the LIBOR market has no real trades. LIBOR is effectively an average of expert guesses by its panel banks. Uncertainty exists as to the replacement index for existing mortgage loans and new mortgage loans. The goal is to replace LIBOR with a market transaction based index grounded in actual borrowing costs.

This Client Alert, written by Chad Richman, explores how the mortgage financing marketplace might replace LIBOR (a benchmark that is broadly used for trillions of dollars of contracts) and the anticipated effect of such replacement on existing mortgage loans and new originations/modifications.