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New SOFR ARM Index and Non-QM ARM Program Changes

May 5, 2023

Overview

The London Interbank Offered Rate (LIBOR) is being discontinued as an approved index for adjustable interest rate mortgages (ARMs), and will be replaced with the Secured Overnight Financing Rate (SOFR) as an approved index for ARM loans.

In anticipation of the transition, effective May 8, 2023, Carrington Mortgage Services, LLC (CMS) will implement the SOFR 30-day Compounded Average Index as the replacement index for all CMS Non-QM ARM loan programs.

In addition to the SOFR change, effective May 8, 2023, CMS will also be making the following changes for Non-QM ARM Loan Programs:

  • Add new 7/1 ARM option for Investor Advantage program
  • Eliminate the 10/1 ARM options for all programs
  • Increase the Margin for all programs
  • Shorten the rate adjustment period from 12 months to 6 months for all programsExpand the Initial Rate Cap from 2% to 5% on Investor Advantage and Flexible Advantage programs

Refer to the tables below for specific SOFR ARM program requirements (changes from current guidelines are highlighted in green):

Prime Advantage SOFR 5-year ARM SOFR 7-year ARM SOFR 10-year ARM
Margin 4.500 4.500 N/A
Initial Cap 2.000 5.000 N/A
Periodic Cap 2.000 2.000 N/A
Lifetime Cap 5.000 5.000 N/A
Floor Start Rate Start Rate N/A
Adjustment Months 6.000 6.000 N/A

 

Flexible Advantage Plus SOFR 5-year ARM SOFR 7-year ARM SOFR 10-year ARM
Margin 4.500 4.500 N/A
Initial Cap 2.000 5.000 N/A
Periodic Cap 2.000 2.000 N/A
Lifetime Cap 5.000 5.000 N/A
Floor Start Rate Start Rate N/A
Adjustment Months 6.000 6.000 N/A
Investor Advantage SOFR 5-year ARM SOFR 7-year ARM SOFR 10-year ARM
Margin 6.000 6.000 N/A
Initial Cap 5.000 5.000 N/A
Periodic Cap 2.000 2.000 N/A
Lifetime Cap 5.000 5.000 N/A
Floor Start Rate Start Rate N/A
Adjustment Months 6.000 6.000 N/A
Flexible Advantage SOFR 5-year ARM SOFR 7-year ARM SOFR 10-year ARM
Margin 6.000 6.000 N/A
Initial Cap 5.000 5.000 N/A
Periodic Cap 2.000 2.000 N/A
Lifetime Cap 5.000 5.000 N/A
Floor Start Rate Start Rate N/A
Adjustment Months 6.000 6.000 N/A

Contacts

Please contact your Account Executive or Account Manager with any questions.

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Contact your Account Executive with questions.

Government Agency Approvals

FHA Non-Supervised Mortgagee Approval #:
24751-0000-5
VA Automatic Lender Approval #:
902324-00-00

Mortgagee/Loss Payee Clause

Carrington Mortgage Services LLC
ISAOA/ATIMA
P.O. Box 692408
San Antonio, TX 78269-2408

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This information is provided for your convenience and Carrington Mortgage Services, LLC makes no warranties concerning the accuracy or completeness of any of the information. This is not financial or legal advice and should not be taken as such. This information is for mortgage professionals only and is not intended for distribution to consumers.
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An Equal Housing Opportunity Lender. Copyright 2007 - 2023 . Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites 110 & 200-A, Anaheim, CA 92806. NMLS ID # 2600. Toll Free # 800-561-4567. All rights reserved. Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines. Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site: www.nmlsconsumeraccess.com.

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Government Agency Approval | FHA Non-Supervised Mortgage Approval #: 24751-0000-5 | VA Automatic Lender Approval #: 902324-00-00

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