ARM Loan Update

Navigating the LIBOR Transition to SOFR

For our customers with an adjustable-rate mortgage loan currently tied to the LIBOR index used to determine the interest rate charged, please read the information below regarding the transition from the LIBOR index to a new more reliable index.

What You Need to Know

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  • Because of regulatory concerns with manipulation of LIBOR, the industry has discontinued the use of LIBOR as a benchmark index and adopting more reliable indexes for new instruments.
  • After June 30, 2023, the LIBOR index that is used to determine the interest rate charged for some adjustable-rate loans, will no longer be available. This will affect some adjustable-rate mortgage (ARM) loans and lines of credit that use the LIBOR index to determine the interest rate.
  • If your adjustable-rate loan is based on the LIBOR index, a new index will be assigned to your loan at the next scheduled interest rate change date that occurs on your loan after June 30, 2023.
  • The President signed the Adjustable Interest Rate (LIBOR) Act (the “Act”) into law in March 2022. Under its terms, SouthState’s LIBOR based loans will transition to SOFR as provided by the Act and the regulations that are to be created by the end of September 2022.
Frequently Asked Questions

Frequently Asked Questions

LIBOR (London Interbank Offered Rate) is a benchmark index used by banks to determine interest payments for financial products with variable or adjustable rates such as mortgage loans.

Regulators found discrepancies in the data used to compile LIBOR and determined that banks must use a more reliable index. Thus, LIBOR ceased for new instruments at the end of 2021 and will no longer be reported after June 30, 2023.

No. This transition is happening worldwide. Due to changes in the financial industry and the possible manipulation of LIBOR, there is a shift globally to move away from LIBOR to more reliable indices, such as SOFR.

Your current ARM loan features an interest rate which is fixed for a period of time and then adjusts periodically to reflect a new interest rate. The interest rate for ARMs adjusts by using an index and a margin. The LIBOR index, which is used to determine the interest rate for your ARM loan, will be replaced by a new index at the next scheduled interest rate change date which occurs on your loan after June 30, 2023. The President signed the Adjustable Interest Rate (LIBOR) Act (the “Act”) into law in March 2022. Under its terms, SouthState’s LIBOR based loans will transition to SOFR as provided by the Act and the regulations that are to be created by the end of September 2022.

We will transition your ARM loan to the SOFR index in order to determine the periodic interest rate adjustment. Once the LIBOR index is replaced by SOFR, the other terms of your ARM loan, such as the maximum interest rate you may pay during the term of the ARM, or the timing of any interest rate adjustments, will not change.

The interest rate and the amount of your loan payment is based on the terms specified in the mortgage loan agreement you signed with us. The adjustable rate on your loan will not change and continue to be based on the LIBOR index until your next scheduled rate change after June 30, 2023. After that date, and when it’s time for the interest rate adjustment, it will be based on the replacement index, which we will be the SOFR index. The payment amount will be based upon the SOFR index as of that date and may be more or less than your current payment amount. We will keep you informed of all changes to your loan, including the replacement rate.

Currently, the interest rate on your ARM loan consists of the LIBOR index and a margin. Once the discontinuation of the LIBOR index occurs on June 30, 2023, the replacement index we have selected for all of our mortgage loans currently using the LIBOR index will be the SOFR index.

SOFR is a rate index which has been selected by many lenders that is more firmly based on market transactions and is the index used in Adjustable Interest Rate (LIBOR) Act (the “Act”). In contrast to LIBOR, which determines rates based on opinions of panel banks, the SOFR index is based on a broad view of transactional data related to the cost of borrowing cash overnight through the repo markets in the U.S.

As described in your loan agreement, when the LIBOR index is discontinued on June 30, 2023, we will replace it with a new comparable index to determine the future interest rate and payment changes for your ARM loan.

When the LIBOR index is discontinued on June 30, 2023, we will replace it with the SOFR index which will be used to determine the future interest rate and payment changes for your ARM loan beginning on the next change date.

The interest rate and the amount of your loan payment is based on the terms specified in the mortgage loan agreement you signed with us. The adjustable rate on your loan will not change and continue to be based on the LIBOR index until your next scheduled rate change after June 30, 2023. After that date, and when it’s time for the interest rate adjustment, it will be based on the SOFR index.

No. The replacement of the LIBOR index will not change other terms of your ARM loan such as the maximum interest rate you may pay during the term of the ARM or the timing of any interest rate adjustments.

There is no action needed from you regarding the transition from the LIBOR Index.

You may refer to your account statement for the current interest rate on your ARM. You may also find additional information regarding the transition from LIBOR to SOFR below:

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