Rates

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• What is happening to the LIBOR index?

  The LIBOR (London Interbank Offered Rate) index is used to adjust the interest rate on certain variable rate loans. LIBOR was discontinued industry wide on June 30, 2023. For additional information on the discontinuation of LIBOR, please visit the Alternative Reference Rates Committee website, which is maintained by the Federal Reserve Bank of New York.

• What will the LIBOR index be changing to?

  What will the LIBOR index be changing to?

  For consumer purpose loans, the replacement index will be as follows as prescribed by the LIBOR Act:

   

  LIBOR Index	Replacement Index
  1 Year LIBOR	12 Month CME Term SOFR1 plus 0.71513 percent spread adjustment*

   

  For non-consumer purpose/business purpose loans (includes NOO 1-4 family rental properties), the replacement index will be as follows as prescribed by the LIBOR Act:

   

  LIBOR Index	Replacement Index
  1 Month LIBOR	1 Month CME Term SOFR plus 0.11448 percent spread adjustment
  3 Month LIBOR	3 Month CME Term SOFR plus 0.26161 percent spread adjustment
  6 Month LIBOR	6 Month CME Term SOFR plus 0.42826 percent spread adjustment
  1 Year LIBOR	12 Month CME Term SOFR plus 0.71513 percent spread adjustment

   

  ¹SOFR – Secured Overnight Financing Rate is a broad measure of overnight borrowing costs collateralized by Treasury securities. For additional information, please visit: Federal Reserve Bank of New York.

   

• What is the LIBOR Act?

  The LIBOR Act and its implementing regulation establishes a clear, uniform and streamlined process, on a nationwide basis, to facilitate the replacement of LIBOR in existing contracts.  For additional information on the LIBOR Act, please click HERE.

• When can borrowers expect to be notified of the new/replacement index?

  A Replacement Index Letter was mailed out in early July 2023.

• When will the replacement index be applied to a given loan?

  The replacement index will be applied on the borrower’s scheduled rate adjustment occurring after July 1, 2023, as per the terms of their promissory note.  The borrower will receive a separate written notice in advance of their scheduled rate adjustment that will specify the new index, new interest rate and new payment amount as well as when the new payment will take effect.

• Will this change results in a loan modification?

  This transition will not result in a loan modification because our existing promissory notes allow for a replacement index in the event the original index becomes unavailable or is discontinued.

• Will the annual and lifetime maximum interest rate adjustments and other rate caps (floors) change?

  No, the replacement index will not change or affect any other terms of the loan /existing promissory note.

• Will there be a corresponding change to the margin on the loan? If so, what will be the new margin?

  This transition will not change the existing margin on a given loan. (Please note that the “spread adjustment” is an adjustment to the replacement index and NOT the margin, and is intended to address certain differences between SOFR and LIBOR as prescribed by the LIBOR Act).

• Who can I contact for additional information?

  For further questions, please contact our Communications Center at 866-372-1200 or info at ffnwb dot com