Independent Banker - June 2020 - 21
it's substantially similar to the bank's previous index or
method, and as long as the bank is prepared to explain its
choice to regulators and borrowers.
Considering SOFR?
In March, the Federal Reserve Bank of New York, in cooperation
with the Treasury Department's Office of Financial
Research, began publishing 30-day, 90-day and 180-day
SOFR averages, as well as a SOFR index, to support a successful
transition from LIBOR.
The New York Fed also released information about the
policies and procedures related to administration of the
SOFR averages and index. The information included the
calculation methodology, treatment of nonbusiness days
and a revision policy.
Tom Hauck, a managing director of advisory firm ProBank
Austin in Toledo, Ohio, says that in conversations
with his community bank clients, he's hearing they're still
very early in the process of preparing for the transition. His
clients are telling him that " no definite plans are in place. "
" Having said that, one of my bank clients was contacted
by the Federal Reserve, which regulates [the bank's] holding
company, asking questions about their process and
what they plan on doing, " Hauck says. " The examiners are
starting to ramp up their processes, so banks have to start
developing their plans. "
For community banks contemplating using SOFR, he
says, they will need to take time to monitor the New York
Fed's SOFR averages and index for each of the averages to
determine what kind of correlation each has with the rates
of the various terms of the U.S. Treasuries.
" Banks will want to make sure their customers are getting
a similar rate as they did before, so they will put an appropriate
spread over the index to achieve the similar rate, "
Hauck says. " For example, if a customer currently is paying
three-month LIBOR plus 200 basis points and the SOFR
rate is lower than three-month LIBOR, the bank will have
to adjust the spread to keep the customer's rate the same. "
It will take a number of months of published SOFR rates
to adequately determinate the correlation with LIBOR and
Treasury rates, so Hauck expects banks won't make their
final determination on whether to use SOFR until the end
of 2020 or early 2021.
For community banks making mortgage loans sold to
Fannie Mae and Freddie Mac, the Federal Housing Finance
Agency announced in February 2020 the following timeline
as the GSEs transition away from LIBOR:
Q New language will be required for single-family uniform
adjustable rate mortgage instruments closed on or after
June 1, 2020.
Q All LIBOR-based single-family and multifamily
adjustable-rate mortgages (ARMs) must have loan
application dates on or before Sept. 30, 2020, to be
eligible for acquisition.
Q Acquisitions of single-family and multifamily LIBOR
ARMs will cease on or before Dec. 31, 2020.
Community banks can look to vendors to help them
maintain and deliver loan document templates published
by GSEs, says Christine Heine, a principal consultant
based in St. Cloud, Minn., for Wolters Kluwer's Compliance
Center of Excellence.
For national and regional banks managing their own
release cycle, changes to language pertaining to the LIBOR
" At this point,
[community banks] are
keeping watchful eyes
and ears to see what they
can learn. "
-Anna Kooi, Wipfli LLP
switch was in Wolters Kluwer's March release of the updated
loan document templates, Heine says. For community
banks that do not manage their own release cycle and use
Wolters Kluwer's ComplianceOne software solution to generate
compliant loan documents, documents with updated
language were in its April software update.
" In the short term, banks need to decide what they will
replace LIBOR with, because they will no longer be able
to use it on agency paper with an application date after
Sept. 30, " Heine says. " If they are already using some
other index in addition to LIBOR, that may be easy: Just
only offer the other index. But if banks need to add another
index, there could also be changes to marketing materials
and their calculations systems or processes. "
Considering AMERIBOR or another method?
In February, 10 banks wrote a letter to banking regulators
that AMERIBOR would work better for them than SOFR,
which requires borrowers to post collateral like U.S. Treasuries
for the secured rate.
The group of banks, which according to Bloomberg have
assets ranging from $8 billion to $60 billion, wrote that
independentbanker.org Q 21
http://www.independentbanker.org
Independent Banker - June 2020
Table of Contents for the Digital Edition of Independent Banker - June 2020
Table of Contents
Independent Banker - June 2020 - Intro
Independent Banker - June 2020 - Cover1
Independent Banker - June 2020 - Cover2
Independent Banker - June 2020 - Table of Contents
Independent Banker - June 2020 - 2
Independent Banker - June 2020 - 3
Independent Banker - June 2020 - 4
Independent Banker - June 2020 - 5
Independent Banker - June 2020 - 6
Independent Banker - June 2020 - 7
Independent Banker - June 2020 - 8
Independent Banker - June 2020 - 9
Independent Banker - June 2020 - 10
Independent Banker - June 2020 - 11
Independent Banker - June 2020 - 12
Independent Banker - June 2020 - 13
Independent Banker - June 2020 - 14
Independent Banker - June 2020 - 15
Independent Banker - June 2020 - 16
Independent Banker - June 2020 - 17
Independent Banker - June 2020 - 18
Independent Banker - June 2020 - 19
Independent Banker - June 2020 - 20
Independent Banker - June 2020 - 21
Independent Banker - June 2020 - 22
Independent Banker - June 2020 - 23
Independent Banker - June 2020 - 24
Independent Banker - June 2020 - 25
Independent Banker - June 2020 - 26
Independent Banker - June 2020 - 27
Independent Banker - June 2020 - 28
Independent Banker - June 2020 - 29
Independent Banker - June 2020 - 30
Independent Banker - June 2020 - 31
Independent Banker - June 2020 - 32
Independent Banker - June 2020 - 33
Independent Banker - June 2020 - 34
Independent Banker - June 2020 - 35
Independent Banker - June 2020 - 36
Independent Banker - June 2020 - 37
Independent Banker - June 2020 - 38
Independent Banker - June 2020 - 39
Independent Banker - June 2020 - 40
Independent Banker - June 2020 - 41
Independent Banker - June 2020 - 42
Independent Banker - June 2020 - 43
Independent Banker - June 2020 - 44
Independent Banker - June 2020 - 45
Independent Banker - June 2020 - 46
Independent Banker - June 2020 - 47
Independent Banker - June 2020 - 48
Independent Banker - June 2020 - 49
Independent Banker - June 2020 - 50
Independent Banker - June 2020 - 51
Independent Banker - June 2020 - 52
Independent Banker - June 2020 - 53
Independent Banker - June 2020 - 54
Independent Banker - June 2020 - 55
Independent Banker - June 2020 - 56
Independent Banker - June 2020 - 57
Independent Banker - June 2020 - 58
Independent Banker - June 2020 - 59
Independent Banker - June 2020 - 60
Independent Banker - June 2020 - 61
Independent Banker - June 2020 - 62
Independent Banker - June 2020 - 63
Independent Banker - June 2020 - 64
Independent Banker - June 2020 - 65
Independent Banker - June 2020 - 66
Independent Banker - June 2020 - 67
Independent Banker - June 2020 - 68
Independent Banker - June 2020 - 69
Independent Banker - June 2020 - 70
Independent Banker - June 2020 - 71
Independent Banker - June 2020 - 72
Independent Banker - June 2020 - Cover3
Independent Banker - June 2020 - Cover4
https://www.nxtbook.com/mspc/independentbanker/october2024
https://www.nxtbook.com/mspc/independentbanker/september2024
https://www.nxtbook.com/mspc/independentbanker/august2024
https://www.nxtbook.com/mspc/independentbanker/july2024
https://www.nxtbook.com/mspc/independentbanker/june2024
https://www.nxtbook.com/mspc/independentbanker/may2024
https://www.nxtbook.com/mspc/independentbanker/april2024
https://www.nxtbook.com/mspc/independentbanker/march2024
https://www.nxtbook.com/mspc/independentbanker/february2024
https://www.nxtbook.com/mspc/independentbanker/january2024
https://www.nxtbook.com/mspc/independentbanker/december2023
https://www.nxtbook.com/mspc/independentbanker/november2023
https://www.nxtbook.com/mspc/independentbanker/october2023
https://www.nxtbook.com/mspc/independentbanker/september2023
https://www.nxtbook.com/mspc/independentbanker/august2023
https://www.nxtbook.com/mspc/independentbanker/july2023
https://www.nxtbook.com/mspc/independentbanker/june2023
https://www.nxtbook.com/mspc/independentbanker/may2023
https://www.nxtbook.com/mspc/independentbanker/april2023
https://www.nxtbook.com/mspc/independentbanker/march2023
https://www.nxtbook.com/mspc/independentbanker/february2023
https://www.nxtbook.com/mspc/independentbanker/january2023
https://www.nxtbook.com/mspc/independentbanker/december2022
https://www.nxtbook.com/mspc/independentbanker/november2022
https://www.nxtbook.com/mspc/independentbanker/october2022
https://www.nxtbook.com/mspc/independentbanker/september2022
https://www.nxtbook.com/mspc/independentbanker/august2022
https://www.nxtbook.com/mspc/independentbanker/july2022
https://www.nxtbook.com/mspc/independentbanker/june2022
https://www.nxtbook.com/mspc/independentbanker/may2022
https://www.nxtbook.com/mspc/independentbanker/april2022
https://www.nxtbook.com/mspc/independentbanker/march2022
https://www.nxtbook.com/mspc/independentbanker/february2022
https://www.nxtbook.com/mspc/independentbanker/january2022
https://www.nxtbook.com/mspc/independentbanker/december2021
https://www.nxtbook.com/mspc/independentbanker/november2021
https://www.nxtbook.com/mspc/independentbanker/october2021
https://www.nxtbook.com/mspc/independentbanker/september2021
https://www.nxtbook.com/mspc/independentbanker/august2021
https://www.nxtbook.com/mspc/independentbanker/july2021
https://www.nxtbook.com/mspc/independentbanker/june2021
https://www.nxtbook.com/mspc/independentbanker/may2021
https://www.nxtbook.com/mspc/independentbanker/april2021
https://www.nxtbook.com/mspc/independentbanker/march2021
https://www.nxtbook.com/mspc/independentbanker/february2021
https://www.nxtbook.com/mspc/independentbanker/january2021
https://www.nxtbook.com/mspc/independentbanker/december2020
https://www.nxtbook.com/mspc/independentbanker/november2020
https://www.nxtbook.com/mspc/independentbanker/october2020
https://www.nxtbook.com/mspc/independentbanker/september2020
https://www.nxtbook.com/mspc/independentbanker/august2020
https://www.nxtbook.com/mspc/independentbanker/july2020
https://www.nxtbook.com/mspc/independentbanker/june2020
https://www.nxtbook.com/mspc/independentbanker/may2020
https://www.nxtbook.com/mspc/independentbanker/april2020
https://www.nxtbook.com/mspc/independentbanker/march2020
https://www.nxtbook.com/mspc/independentbanker/february2020
https://www.nxtbook.com/mspc/independentbanker/january2020
https://www.nxtbook.com/mspc/independentbanker/december2019
https://www.nxtbook.com/mspc/independentbanker/november2019
https://www.nxtbook.com/mspc/independentbanker/october2019
https://www.nxtbook.com/mspc/independentbanker/september2019
https://www.nxtbook.com/mspc/independentbanker/august2019
https://www.nxtbook.com/mspc/independentbanker/july2019
https://www.nxtbook.com/mspc/independentbanker/june2019
https://www.nxtbook.com/mspc/independentbanker/may2019
https://www.nxtbook.com/mspc/independentbanker/april2019
https://www.nxtbook.com/mspc/independentbanker/march2019
https://www.nxtbook.com/mspc/independentbanker/february2019
https://www.nxtbook.com/mspc/independentbanker/january2019
https://www.nxtbook.com/mspc/independentbanker/december2018
https://www.nxtbook.com/mspc/independentbanker/november2018
https://www.nxtbook.com/mspc/independentbanker/october2018
https://www.nxtbook.com/mspc/independentbanker/september2018
https://www.nxtbook.com/mspc/independentbanker/august2018
https://www.nxtbook.com/mspc/independentbanker/july2018
https://www.nxtbook.com/mspc/independentbanker/june2018
https://www.nxtbook.com/mspc/independentbanker/may2018
https://www.nxtbook.com/mspc/independentbanker/april2018
https://www.nxtbook.com/mspc/independentbanker/march2018
https://www.nxtbook.com/mspc/independentbanker/february2018
https://www.nxtbook.com/mspc/independentbanker/january2018
https://www.nxtbook.com/mspc/independentbanker/december2017
https://www.nxtbook.com/mspc/independentbanker/november2017
https://www.nxtbook.com/mspc/independentbanker/october2017
https://www.nxtbook.com/mspc/independentbanker/september2017
https://www.nxtbook.com/mspc/independentbanker/august2017
https://www.nxtbook.com/mspc/independentbanker/july2017
https://www.nxtbook.com/mspc/independentbanker/june2017
https://www.nxtbook.com/mspc/independentbanker/may2017
https://www.nxtbook.com/mspc/independentbanker/april2017
https://www.nxtbookmedia.com