Under Federal Housing Finance Agency (“FHFA”) guidance, Fannie Mae and Freddie Mac (the “GSEs”) have provided further clarification regarding the discontinuance of the purchase of Adjustable-Rate Mortgage (“ARM”) loans with a Constant Maturity Treasury (“CMT”) Index. In February 2020, the GSEs announced that they would stop purchasing CMT-indexed ARM loans in 2021. Recently Fannie Mae released Lender Letter 2021-05 and Freddie Mac published Bulletin 2021-4 to provide further updates.
In Lender Letter 2021-05, Fannie Mae indicates that all CMT-indexed ARMs must have an application date on or before June 30, 2021, and “must be purchased as whole loans on or before September 30, 2021 or delivered into MBS pools with issue dates on or before September 1, 2021.” In Bulletin 2021-4, Freddie Mac announced that it will not purchase any CMT-indexed ARMs with an Application Received Date of July 1, 2021 or later. Freddie Mac will not purchase any CMT-indexed ARMs on or after October 1, 2021 regardless of Application Received Date and Loan Selling Advisor will be updated to prevent delivery of CMT-indexed ARMS with a Settlement Date on or after October 1, 2021.
Lender Letter 2021-05 also clarifies that the CMT indexes will continue to be published, and that there is no change for servicers currently servicing loans using a CMT index. Unlike the LIBOR index, which is set to stop being published around the end of 2021, CMT-related indexes will continue to be published and used for other financial products.
DocMagic will continue to provide updates as information becomes available.If you have any questions, please contact DocMagic’s Compliance Department.
