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52 Journal GETTING READY FOR LIBOR'S END LIBOR, the London Inter-Bank Offered Rate, is expected to discontinue sometime after 2021, but as the index is used to set many adjustable mortgage rates, what will happen next? Jacqueline Doty, Executive, Product Management, Collateral Risk Solutions at CoreLogic, explained that the end of LIBOR will impact $1.2 trillion dollars in adjustable- rate mortgages. "It means that lenders with loans or lines of credit based on the LIBOR index will need to identify and review the terms of all of their LIBOR loans," Doty said. "A portfolio of loans likely contains a wide variety of terms regarding LIBOR, and this will need to be assessed." LIBOR's end is likely to impact more than lenders and borrowers. According to Fitch Ratings, U.S. RMBS servicers showed an improved awareness of difficulties and implications tied to the anticipated expiration of LIBOR at the end of 2021. To help facilitate the likely transition away from LIBOR, Doty notes that the Federal Reserve convened a working group called the Alternative Reference Rates Committee. e ARRC has recommended an alternative to the LIBOR index called the Secured Overnight Financing Rate (SOFR) and has started promoting its use on a voluntary basis. Lenders may need to face modification. Between now and the end of LIBOR, there's a good possibility that many loans will need to be modified because the fallback provisions are either nonexistent, unclear or impractical. "For example, in some cases, the margin cannot be adjusted and it is either too high or too low when added to the new alternate index," Doty said. But there's no need to panic just yet," she adds. "e good news is there's still time to successfully manage a smooth and efficient transition. Now is a good time for lenders to start auditing their loan data and documents and planning for fulfillment of amendments or borrower notifications." FANNIE'S 1.8B REPERFORMING LOAN SALE Fannie Mae began marketing its fifteenth sale of reperforming loans, continuing the GSE's effort to reduce the size of its retained mortgage portfolio. e sales consist of roughly 12,775 loans that have an unpaid principal balance of approximately $1.8 billion. Bids are due on March 10. Reperforming loans are loans that were previously delinquent but have reperformed for a period of time. Some of the loans may be up to 90 days delinquent. Fannie Mae announced the results of its fourteenth reperforming loan sale transaction late last year. e deal included the sale of approximately 20,800 loans totaling $3.1 billion in unpaid principal balance (UPB), divided into six pools. e winning bidders of the six pools for the transaction were DLJ Mortgage Capital, Inc. (Credit Suisse) for Pools 1, 2 and 3, J.P. Morgan Mortgage Acquisition Corp. (Chase) for Pools 4 and 6, and NRZ Mortgage Holdings, LLC (Fortress) for Pool 5. e transaction is expected to close on December 19, 2019. Freddie Mac, meanwhile, recently announced it sold via auction 2,243 non- performing residential first lien loans (NPLs) from its mortgage-related investments portfolio. e loans, with a balance of approximately $369 million, are currently serviced by Specialized Loan Servicing LLC. e transaction was expected to settle in January 2020. e sale is part of Freddie Mac's Standard Pool Offerings. Fannie Mae announced this week that it recorded a net income of $14.2 billion in 2019, including $4.4 billion during Q4 2019. e GSE's net worth rose to $14.6 billion by the end of the year. Based on the current agreement with the U.S. Department of the Treasury and the Federal Housing Finance Agency (FHFA), the company can retain quarterly earnings until its net worth reaches $25 billion. Fannie Mae provided more than $650 billion in liquidity to the mortgage market in 2019, helping finance more than three million purchases, refinances, and rental units. ey were the largest issuer of single- family mortgage-related securities in the secondary market during 2019, with an estimated market share of single-family issuances of 37%.

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