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CFPB Releases LIBOR Transition Rules

The Consumer Financial Protection Bureau (the Bureau) has issued three items related to the London Interbank Offered Rate (LIBOR) Transition for the sunset of LIBOR which is expected to be discontinued after 2021.

First, the Bureau has issued a proposed rule to amend Regulation Z generally to address the sunset of LIBOR, and to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer products. The Bureau is proposing changes to certain open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards. The Bureau is also proposing changes to certain open-end provisions restricting index changes, requiring change-in-terms notices, and addressing how credit card rate reevaluation requirements apply. To assist understanding of the proposed revisions, the Bureau is releasing a Fast Facts high-level summary and an unofficial redline. Comments on the proposed rule are due August 4, 2020.

Second, the Bureau has released additional companion FAQ guidance to address other LIBOR transition topics and regulatory questions under the existing rule. This guidance deals with issues related to general implementation considerations, and requirements for adjustable-rate mortgage servicing notices, adjustable-rate mortgage and HELOC origination disclosures, and requirements under AMTPA.

Third, the Bureau has revised the CHARM Booklet to provide updates based on consumer testing and remove LIBOR-based rate examples.

Additionally, the Federal Housing Finance Agency (FHFA) have announced that Fannie Mae and Freddie Mac (the Enterprises) have launched new websites that provide key resources for lenders and investors as the Enterprises transition away from the London Interbank Offered Rate (LIBOR). LIBOR is expected to stop being published at the end of 2021. The Enterprises’ websites contain information about resources and products, including the Enterprises’ jointly published LIBOR Transition Playbook and Frequently Asked Questions (FAQ).

“To protect our nation’s housing finance markets, FHFA has directed the entities we regulate to transition away from LIBOR. These resources will help market participants to likewise move away from LIBOR in a safe and sound manner,” said FHFA Director Mark Calabria.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.

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