The LIBOR index used to determine the interest rate charged for certain adjustable-rate loans is scheduled to be phased out after 2021. This will affect some loans and lines of credit that use the LIBOR index to determine the interest rate. This transition is an evolving process and many things are not known. However, we are actively working on developing necessary plans to transition existing accounts from LIBOR to another index in a manner that is fair and transparent. We will continue to monitor developments and provide information to our customers to ensure a smooth transition.
What this means to you:
- If you have an adjustable-rate mortgage (“ARM”) that is based on the LIBOR index, we expect to
assign a new index to your loan at your first rate adjustment in June 2023.
- Sometime in Q4 2021, the new adjustable-rate mortgages will no longer use the LIBOR index.
LIBOR FAQs and information
If you are interested in learning more about ARMs, the Consumer Financial Protection Bureau (“CFPB”) provides a Consumer Handbook on Adjustable-Rate Mortgages.
• Why is the LIBOR index going away?
|While LIBOR has been a long-established global benchmark for interest rates, its credibility has declined over the past decade. During the financial crisis that began in 2007, LIBOR sometimes behaved in unpredictable and volatile ways. In addition, the volume of transactions supporting LIBOR continues to decrease. As a result, the regulator of LIBOR called for the market to transition to more robust reference rates.
• What is CTBC Bank doing about changes to LIBOR?
|We are monitoring the situation and information provided by the Alternative Reference Rates Committee (“ARRC”) to develop a transition to a replacement index that will be fair and transparent.
• What is ARRC?
|The ARRC is a group of private-market participants convened to help ensure a successful transition from USD LIBOR to a more robust reference rate. You can learn more about ARRC from their website: https://www.newyorkfed.org/arrc.
• What index will CTBC Bank use to replace LIBOR?
|The ARRC is recommending that banks use the SOFR (Secured Overnight Financing Rate) index to replace LIBOR, and many other banks and other participants in the residential mortgage finance market have announced that they have decided to use the 30day average SOFR as their replacement rate. The 30day average SOFR averages and index data can be reviewed here. We have not yet made a final decision about a replacement rate. We may use SOFR or we may choose another index. We will provide more information when we have made a final decision.
• When will my adjustable-rate mortgage change to the new index?
|• We expect that we will use the new index to determine the interest rate at the time your loan interest rate adjusts in June 2023. Your interest rate will continue to be based on the LIBOR index until then.
•What happens if I obtain a new adjustable-rate loan?
|• From now until a date to be determined sometime in Q4 2021, new CTBC Bank adjustable-rate mortgage loans will be based on a new index. New loans originated before that date will continue to be based on the LIBOR index and will then transition to the new index sometime in June 2023.
• How will CTBC Bank keep me informed about changes to my loan?
|To ensure that we are able to provide you with information, make sure your contact information is current. We will post updates to our website as new information becomes available. In addition, we will send updates by mail in early 2023 and notify you approximately 90 days before LIBOR ends. You will also receive updates when your loan is updated to the new index and when your new interest rate and payment effective dates get closer.
• What are my options?
|You may consider refinancing to a fixed-rate mortgage loan. Your interest rate will remain the same for the life of your loan; the principal and interest portion of your payment will not change making it easier to budget and plan. To learn more go here or call 888-605-1143 to speak to a mortgage loan officer.
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