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Have an Adjustable-Rate Mortgage? Look out for This Weird Letter
May 10, 2021
Homeowners with adjustable-rate mortgages may soon receive a strange notice from their servicers. The subject? “Transition Away from the LIBOR Index for Your Adjustable-Rate Mortgage.”
If it sounds like jargon, you’re right. Though mortgage lenders have long used the LIBOR index — the London Inter-Bank Offered Rate — as the benchmark in setting interest rates for adjustable mortgages, the majority of borrowers likely aren’t aware of it.
“LIBOR has been the predominant interest rate benchmark for several decades now, going back to the ‘80s,” said Dan Fichtler, associate vice president of housing finance policy at the Mortgage Bankers Association. “It’s quite ingrained into a whole host of financial products, including adjustable-rate mortgages.”
Read the entire article here.