July 24, 2020
As our transition to implementing the SOFR index nears, we’d like to provide clarity on our approach to interest rate caps for SOFR-based loans.
Borrowers with a SOFR-based loan will be permitted, on a temporary basis, to purchase a LIBOR-based cap agreement instead of a SOFR-based cap agreement. While Freddie Mac’s requirements for interest rate caps are not expected to change if a SOFR-based cap agreement is purchased, additional requirements will apply if the borrower elects to purchase a LIBOR-based cap. The anticipated additional requirements if a LIBOR-based cap is purchased for a SOFR-based loan include the following:
If you have questions, or feedback, please send us an email to MFLIBOR@freddiemac.com.
We appreciate your partnership and look forward to a smooth transition.
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