Commercial and multifamily mortgage lenders need to figure out their plan for replacing the London interbank offered rate index potentially expiring at the end of 2021.
The urgency and uncertainty surrounding the issue beckoned
"The vast majority of
"Most firms are already taking some steps, including changing language in loan documents, but they also report relying on regulators and industry-bodies to make decisions before they take certain actions. The net result is a fair amount of uncertainty about the mechanics of the transition away from Libor, and an overall hesitation as many firms wait for others to lead the way," Woodwell continued.
Once that definitive road for a replacement gets laid out, it'll have a ripple effect through the industry. That replacement would need to cover new and legacy adjustable-rate mortgages, securities and credit risk transfer instruments. An estimated $1.2 trillion of commercial and multifamily mortgages
"Over the past few weeks you've seen fallback language from several different
The secured overnight financing rate offers a Libor alternative,
About 77% of survey respondents already adjusted Libor fallback language in all their new loan documents and 56% said they're on track in preparing for a post-Libor future. But every operation will need to tailor their transition plans based on their lending type, investors and volume, among other factors.
"MBA and its Libor Outreach Committee of members are developing resources to educate market participants and help ensure all stakeholders are focused on the important issues, with the goal of a smooth transition," said Foster. "Given all that is at stake for the commercial real estate debt markets, as well as many other asset classes that utilize Libor, an ounce of preparedness is worth a pound of cure."