The Alternative Reference Rates Committee ("ARRC") provided recommended fallback contract language for new closed-end, residential adjustable-rate mortgages ("ARMs") that reference U.S. dollar LIBOR.
The ARRC stated that the current contract language in closed-end, residential ARMs typically does not clarify when an index is no longer available or how to select a replacement index. The ARM fallback proposal, according to ARRC, (i) addresses that lack of clarity by clearly defining the types of "trigger" events that require the "Note Holder" to transition from LIBOR to a new reference rate and (ii) contains a "waterfall" provision for selecting the index replacement.
Comments must be submitted by September 10, 2019.
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