Q: What indices are identified in the LIBOR Transition Rule as examples of comparable indices for each LIBOR tenor?
A: As stated above, in LIBOR Adjustable-Rate Mortgage FAQ 4, if a creditor wishes to avoid triggering a refinance of the transaction during the LIBOR transition, the creditor must select a replacement index that is comparable to the LIBOR index. Comment 20(a)-3.ii.B.
The ARRC has recommended certain SOFR-based spread adjusted indices (SOFR-Based Spread-Adjusted Indices) to replace certain tenors of LIBOR for consumer products. For purposes of this Regulation Z provision, these SOFR-Based Spread-Adjusted Indices are examples of indices that are comparable to certain tenors of LIBOR. These comparable indices include:
1-month LIBOR: The SOFR-Based Spread-Adjusted Index to replace 1-month LIBOR is an example of a comparable index for 1-month LIBOR.
3-month LIBOR: The SOFR-Based Spread-Adjusted index to replace 3-month LIBOR is an example of a comparable index for 3-month LIBOR.
6-month LIBOR: The SOFR-Based Spread-Adjusted Index to replace 6-month LIBOR is an example of a comparable index for 6-month LIBOR.
If a creditor replaced one of the identified tenors of LIBOR with its respective SOFR-Based Spread-Adjusted Index, the creditor would not trigger a refinance through that action. Other indices may also be comparable.