If you have an ARM, you may have heard about SOFR replacing LIBOR.  Sounds scary, right?  In fact, while these industry-specific terms may be confusing, there is nothing to be alarmed about. 

Read on to get up-to-speed and learn more about this shift. 

What is LIBOR? 
If you are a homeowner with an ARM, the amount your payments adjust is likely tied to a London Interbank Offered Rate (LIBOR) index. 

Since 1969, LIBOR has been the benchmark index for the financial industry around the world.  Today, millions of people have taken out LIBOR-based mortgages, student loans, and business loans.  

The data that determines LIBOR is estimated by a group of banks.  Now, for a variety of reasons, LIBOR is going away, most likely by the end of 2021.  

The Secured Overnight Financing Rate (SOFR) has been identified as the recommended successor index to LIBOR.  Like other banks and market participants, Wintrust is working to ensure an orderly transition.  

What is SOFR?
SOFR is an index based on certain financial transactions between banks.  

How will the transition to SOFR affect individual loan amounts or payments?
SOFR has been selected as the replacement index because it is comparable to LIBOR.

When will the transition occur? 
New loans already are starting to shift from LIBOR to SOFR, and all new loans will be converted before the end of 2021.  Existing loans will start transitioning to SOFR when LIBOR will no longer be available.  

At Wintrust, we are committed to a transparent and even-handed transition, and we will continue to watch and analyze industry developments.  

I have an ARM.  What do I need to do? 
Nothing.  If you’re a Wintrust Mortgage customer, we will take care of the conversion so it happens seamlessly.  Once LIBOR is no longer available, all Wintrust Mortgage ARMs will use SOFR moving forward.

Additional questions?  If you’d like to know more about this shift or any type of home loan, talk with your mortgage expert. 

Learn more:
Federal Housing Finance Agency
Consumer Financial Protection Bureau