London Interbank Offered Rate (LIBOR) Transition

LIBOR transition will have an impact on CRE lenders.

Overview: The London Interbank Offered Rate (LIBOR) is a reference rate used, for example, to establish an interest rate for a floating-rate instrument. The interest rate for the instrument may be set as a specified tenor of LIBOR plus a fixed spread. The current processes for establishing LIBOR are expected to cease at the end of 2021. The Federal Reserve and the New York Fed jointly convened the Alternative Reference Rate Committee (ARRC) to help ensure a successful transition from LIBOR. Its recommended alternative is the Secured Overnight Financing Rate (SOFR). MBA is working with members to facilitate and support LIBOR transition.

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MBA’s Commercial Real Estate Finance Preparation for LIBOR Transition Survey

LIBOR is used as the base rate for more than a trillion dollars of adjustable-rate commercial and multifamily mortgages and is potentially set to expire at the end of 2021. A new survey conducted by MBA's LIBOR Outreach Committee in May 2019 revealed that commercial and multifamily real estate finance firms are preparing for the transition away from the London Interbank Offered Rate (LIBOR), but there is little uniformity when it comes to the details.

Click here to download the results of MBA's Commercial Real Estate Finance Preparation for LIBOR Transition Survey.

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