On May 17, 2019, Fannie Mae and Freddie Mac announced changes to ARM eligibility requirements that are effective immediately. The changes are due to the anticipated discontinuance of the LIBOR index in 2021.
Lender Letter LL-2019-05 provides that all LIBOR ARM loans must be purchased or securitized by Fannie Mae no later than six months from the first payment date of the loan. The June Selling Guide update will reflect that Fannie Mae will not purchase or securitize any LIBOR ARM loans older than six months on a “flow” or negotiated basis. It is noted that the new policy does not affect Fannie Mae’s ability to purchase fully-guaranteed securities traded in the secondary market that are backed by LIBOR ARM loans, regardless of seasoning or issuance date.
Bulletin 2019-10 advises that Freddie Mac will no longer purchase LIBOR ARM loans with settlement dates more than six months after the Note Date. Loan Selling Advisor will be updated on May 21, 2019 to reflect this change.
The policies make clear that Fannie Mae and Freddie Mac will continue to purchase newly originated LIBOR ARM loans so long as they are seasoned six months or less. The policies are being taken in consultation with the Federal Housing Finance Agency.
DocMagic will continue to make available loan plans, and associated documents, that support lending using a LIBOR index further notification from Fannie Mae and Freddie Mac.
