Last year, Freddie Mac adopted SOFR and phase out LIBOR, and the move is triggering a trend throughout the lending community. More and more lenders are referencing SOFR in their loan documents, following Freddie Mac's lead to shift away from LIBOR.
"Freddie Mac's Multifamily Division has indicated that it will begin purchasing floating-rate loans that use an index based on SOFR by November 1, 2020 at the latest, and that it will cease purchasing LIBOR-indexed floating-rate loans after December 31, 2020," Jennifer Bojorquez, a partner at Troutman Sanders, tells GlobeSt.com. "In December 2019, it priced a new offering of Structured Pass-Through Certificates, which included a class of floating rate bonds indexed to SOFR."
As a result, other lenders are also adopting SOFR and adjusting loan language to include SOFR. "Until recently, many lenders used generic alternate rate language in their loan documents without reference to any particular alternate interest rate benchmark," says Bojorquez. "We now see lenders referencing SOFR as the specific alternate rate or the primary alternate rate—first in the waterfall of other alternatives—in the event LIBOR is no longer published."
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.