MBA Shares Recommendations With CFPB Regarding LIBOR Transition
The Mortgage Bankers Association shared recommendations with the Consumer Financial Protection Bureau regarding the bureau’s proposed rule to amend Regulation Z to facilitate the transition away from LIBOR.
The full letter is available here.
“Over the past several years, MBA has played an active role to help ensure that this transition does not cause disruptions in the single-family or commercial/multifamily mortgage markets,” MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills said in a letter to Consumer Financial Protection Bureau Director Kathy Kraninger. “This work has entailed engagement with the Alternative Reference Rates Committee (ARRC) as well as the development of resources and informational materials for various mortgage market participants.”
The letter noted MBA appreciates the efforts of the Bureau and the other ex officio and permanent members of the ARRC during the transition process, particularly given the complex nature of the challenges in moving financial markets away from the use of LIBOR. “A continued partnership between regulators and market participants will be necessary to produce a smooth implementation of alternative reference rates,” it said.
When considering potential policy actions to facilitate the transition, MBA evaluates how such actions adhere to four core principles:
–Transition steps should minimize the potential for disruption to, or dislocation in, the processes for originating, servicing, and investing in adjustable-rate mortgage products;
–Transition steps should minimize the potential for value transfer between various parties;
–Transition steps should promote compliance certainty for market participants; and
–Transition steps should lead to long-run market conditions that are conducive to the broad availability of sustainable, adjustable-rate mortgage products.
“MBA appreciates the Bureau issuing this proposed rule to clarify actions to be taken by creditors in a manner that is consistent with the core principles described above,” the letter said. “The proposed rule would provide creditors with greater compliance certainty when replacing the index on adjustable-rate mortgage products that currently reference LIBOR.”
Other comments in the letter articulated the beneficial features of the proposed rule and suggest additional ways in which the proposed rule could enhance compliance certainty for creditors.
