LIBOR Cessation: RMBS Market Prepares for the End

Published On - November 4, 2021

Christine Brunie Industry Insights
LIBOR Cessation

The move away from the London Interbank Offered Rate (LIBOR) has been aptly described as “landmark transition”. This LIBOR cessation has the financial industry mobilizing ahead of a looming deadline.[1]

The one-week and two-month US dollar LIBOR will cease permanently on December 31, 2021 and the publication of the overnight and 12-month US Dollar LIBOR setting will cease permanently on June 30, 2023.  While the markets have received clarity regarding the timing of the discontinuance of the use of the US dollar based LIBOR, the uncertainty and risks associated with the ramifications of this change continue to be a cause of concern.

In an article recently published by the CFPB, “CFPB Joins Other Financial Regulatory Agencies in Issuing Statement on Discontinuation of LIBOR” the risks surrounding LIBOR cessation are highlighted, as well as specific actions needed to minimize the financial, legal, operational, and consumer protection risks associated with this change.

The Oakleaf Group has extensive expertise in analyzing RMBS trusts performance and in-depth knowledge of the underlying governing documents. We have developed an in-house database which houses extracts of language relating to specific terms from several governing agreements. This database permits us to analyze the underlying agreements associated with a pool of RMBS in an efficient and automated manner.

Depending on the LIBOR alternative, The Oakleaf Group is equipped with expertise to assist in the understanding of the potential investment and legal risk, associated with this transition. Please reach out to Maclean Amlalo if you are interested in learning more about how this could impact your portfolio.

[1] Leaving LIBOR: A Landmark Transition. J.P. Morgan, 1 October 2021.

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