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Freddie is Making the Switch to The Secured Overnight Financing Rate (SOFR)
Friday, December 18, 2020
Freddie Mac is touting its readiness
to transition from using the London Interbank Offered Rate or LIBOR to the Secured
Overnight Financing Rate (SOFR) as a mortgage reference index. The end date for
LIBOR may be extended (yet again) from the end of 2021 to mid-2023, but Freddie
Mac says it remains committed to prepare for a final transition as soon as
possible. SOFR, which was specifically
developed to replace LIBOR, is a broad measure of the cost of borrowing cash
overnight collateralized by Treasury securities. Because, unlike LIBOR, it is
collateralized, its rate tends to be lower. Over the last month it has ranged
between 0.05 and 0.09 percent. The New York Fed publishes the SOFR on its website
each business day.
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