Interest rates

Regulators' oversight of the industry's switch to a new interest rate benchmark is expected to intensify as a key deadline approaches.

The state has proposed a law to cap the interest rate on certain consumer loans, but nonbanks aim to skirt it by seeking a rent-a-charter.

Federal and state policymakers wagged their fingers this week at high-cost lenders that might be looking to team with banks to evade a 36% ceiling on interest rates.

Concerns over banks’ level of preparation have led to worries about disruptions in the lending market, and some financial institutions warn that a new interest rate benchmark could cause lenders to pull back on credit.

Moody’s said the Fed’s cuts – the first in a decade by the central bank – will boost real estate and consumer ABS collateral by helping lenders uphold underwriting standards and provide affordable debt options to borrowers.

The Mortgage Bankers Association created a template for originators to notify new borrowers when their adjustable-rate mortgage switches to a different index once publication of the London interbank offered rate discontinues.

Although Libor will will not be phased out until at least 2021, Randal Quarles said making the switch early is "consistent with prudent risk management."

The state's financial regulator says Fast Money Loan charged consumers interest rates and fees above the state's usury cap, and operated unlicensed storefronts.

While the London interbank offered rate won't go dark until 2021, the commercial real estate finance industry should start preparing for the transition now, says the Mortgage Bankers Association.

An effort to increase awareness of the transition to a new benchmark rate, and nudge banks to start preparing, is expected to intensify in 2019.