LIBOR 12-Month Index

It looks like the LIBOR 1, 3, 6, and 12-month US dollar settings aren’t ending until June 30, 2023. There are years-old ARMs in our portfolio tied to the 12-month index. Does this mean we don't have to consider changing the index on those loan until 2023?

That appears to be the case.

You might consider transitioning before then anyway. The banking regulators have been strong in pushing for institutions to discontinue use of LIBOR on new transactions even if it continues into 2023. The problems with LIBOR aren't going to get any better between now and then, and you'd rather do it in an orderly non-rushed manner than have to do it on the fly because LIBOR starts doing weird things as it reaches its conclusion.

I am not sure about that. While it is true that all LIBOR lending should be discontinued, legally I am not sure you can change the index on existing loans while it is still available.

Depends on the language in the loan docs and the ongoing status of LIBOR. It pays to do that evaluation, get legal advice on your docs, and know your options.

These are older LIBOR ARMS on our books. We haven't originated any new LIBOR ARMS in a couple of years.

Usually the terms indicate that, “. . .if the index is not available.” It still is, ongoing status is immaterial and like Randy mentioned, you need to check the wording to ensure the services is not breaking the contract.

Investigating options is never a bad thing. If the description of the index is "as published in the XXX" and XXX stops publishing LIBOR then the index may no longer be available even if LIBOR has not yet ended.

If you know what you need to do before you have to do it, you'll be better prepared when you have to do it - whenever that may be. And if you know whether or not you can do it before you have to do it, then you know what your options are. If you just wait till 2023 and hope that everything remains as is until then, you may be fine or you may find yourself behind the 8 ball.

Does anyone know if the Wall Street Journal will cease publishing the 1-year LIBOR?

I don't think anyone knows the answer to that. I am not sure where it is published has any impact on anything. Just because your loan contract might have said as published in the WSJ, it ceasing to be published there but it still existing, would be neither here nor there. I would expect that it will continue to be published there until it no longer exists.

Yes the standard text in the Fannie Mae Note is "...,as published in the Wall Street Journal." However, the Note also states "It the Index is no longer available, the Note Holder will........ ."

Oops, I mean "If the Index is no longer available, the Note Holder will........ ."