The Alternative Reference Rates Committee ("ARRC") provided a model for using the Secured Overnight Financing Rate ("SOFR") in asset-backed securities ("ABS"), mortgage-backed securities and commercial mortgage-backed securities products (other than collateralized loan obligations). The ARRC's publication of the model follows its request that the Securitizations Working Group identify important considerations for the development of new issuances of SOFR-based securitized products.
In a white paper, the ARRC described an option for the use of 30-day average SOFR, as published on the Federal Reserve Bank of New York's website, for new issuances of ABS products, with a monthly reset, in advance of the interest accrual period. The white paper provides further detail on how SOFR averages are calculated and how SOFR may be applied in new ABS products.
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