It was announced this summer that the London Interbank Offered Rate or “LIBOR,” will be phased out over the next five years. The LIBOR has been important, as more than $350 trillion in loans in the U.S. and globally have been adjusted based on the LIBOR, including car loans, credit cards and Adjustable Rate Mortgages or “ARMs.” For many ARMs, when the rates became adjustable after the first few years, the adjustment is based on a rate determined by a set margin over the LIBOR rate. However, in 2012 there was a scandal that bankers were manipulating the LIBOR, causing consumers higher interest rates. So for ARMs based on the LIBOR, what happens after 2021? New loans should indicate an interest rate based on an alternate index. Some of the existing loans already indicate an alternative benchmark if the LIBOR is unavailable. But for most existing ARMs, based solely on the LIBOR, the Alternative Reference Raters Committee will set a new index rate based on repurchase transactions backed by Treasury securities. Fannie Mae claims to be monitoring the situation. In the meantime, read your ARM loan documents carefully and we’ll keep you informed as it evolves over the next five years.