Is anyone quoting the Secured Overnight Financing Rate (SOFR) + a spread for real estate loans yet? I have not gotten any traction with sponsors using prime as a benchmark and I'm curious what the RE world will use when LIBOR goes away. SOFR seems like a logical option but I haven't seen any loan requests using that rate yet.
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Hey capitaltide, the following topics might be helpful:
If we're lucky, maybe I can guilt some users to help you out: Kurtis Blow cshen359 Akintayo- Alo. ACA
You're welcome.
I think it will be a while before the "end" of Libor...I have not seen any reference to SOFR yet...
I’ve read internal counsel opinions on it, but everything I see is still labor based.
We have a while before it ends.
I've had borrower's request to have SOFR verbiage included in term sheets versus LIBOR replacement language. However, we did not oblige the request.
In the event LIBOR is not available, we will default to what’s commercial accepted, and if no replacement is available at that time, it defaults to the prime rate and the spread is reset.
It will probably be at least 2021 before the "end" of LIBOR
I've seen SOFR used in docs to be defined as a specific replacement benchmark, but everything is still being quoted and settled with LIBOR based loans as far as I've seen.
Several indices have come to an end. This doesn't mean that the loan needs a new index. COFI was a major index for residential and commercial for decades. It went away in the early 2000's if I had to guess. The index is still tracked, but no new loans are tied to it.
There is someone somewhere with a loan on his house or building from the 90's still tied to COFI and it's doing just fine.
Just got a deal that was quoting SOFR + 250 on a float to fixed loan.
Still have yet to see SOFR referred to in our models and no intentions anytime soon.
Given that LIBOR doesn't actually end until until at least 2021 given that the Bank of England has set 2021 as a transition deadline internally. I for one think many of these deadline dates are wildly optimistic, given that there are $350 TRILLION in debt and derivitaves currently on the market that are based on LIBOR and will require transition to a new standard. I think LIBOR is going to be around longer than "experts" are thinking.
https://www.treliant.com/News-and-Events/Articles-and-Insights/Article-…
Non-RE specific Private Credit; still mainly LIBOR flow, have seen some toggles to SOFR. Have been looking at swaption pricing as a gauge for market reception to the rate.
The real problem with using SOFR vs LIBOR, despite the fundamental differences, is that one is tested (despite a scandal or two), and the other is not.
Completely new to interest rates and economic activity here. Can anyone explain why LIBOR is going to end? I looked online but all I could find were articles that said SOFR would replace LIBOR but nothing on the reasoning behind the end of LIBOR. Any help would be appreciated.
My understanding is that the public faith in LIBOR deteriorated after the manipulation scandal. That might be a gross oversimplification, but I think the qualm was how LIBOR was calculated -- that is, based on banks' reporting as opposed to actual transactions.
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