LIBOR CFPB FAQ HELOCs 8 – What indices are identified in the LIBOR Transition Rule as meeting Condition 2 of the Margin and Index Change Conditions for the LIBOR tenors?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  What indices are identified in the LIBOR Transition Rule as meeting Condition 2 of the Margin and Index Change Conditions for the LIBOR tenors?
 
A:   The LIBOR Transition Rule provided examples of replacement indices that meet the Historical Fluctuation Comparison Condition, discussed above in LIBOR Home Equity Line of Credit FAQ 5, when replacing certain LIBOR indices for HELOC products. The examples provided include certain SOFR-Based Spread-Adjusted Indices and Prime. They would replace each of the following tenors of LIBOR as follows:
 
  • 1-month LIBOR: Prime and the SOFR-Based Spread-Adjusted Index to replace 1-month LIBOR are examples of replacements for 1-month LIBOR.
  • 3-month LIBOR: Prime and the SOFR-Based Spread-Adjusted Index to replace 3-month LIBOR are examples of replacements for 3-month LIBOR.
  • 6-month LIBOR: The SOFR-Based Spread-Adjusted Index to replace 6-month LIBOR is an example of a replacement for 6-month LIBOR.
     
As stated, these indices are examples that meet the Historical Fluctuation Comparison condition. If a creditor uses one of these indices as a replacement for LIBOR, the creditor must still ensure that the replacement index and margin meets the other conditions discussed in LIBOR Home Equity Line of Credit FAQ 5.
 
Additionally, these are examples, but other indices may also meet the Historical Fluctuation Comparison condition. See LIBOR Home Equity Line of Credit FAQ 5 through 10 for more information on factors for determining if an index is an appropriate replacement for LIBOR during the transition.
 
 
This Q&A was created based on information from the Consumer Financial Protection Bureau’s website (which may be updated from time to time) that provides Answers to Frequently Asked Questions on the Transition Away from LIBOR.  This information may be found here:  https://files.consumerfinance.gov/f/documents/cfpb_libor-transition_faqs.pdf
 

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