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11th District Cost of Funds Index (EDCOFI, or simply COFI)
Frequently Asked Questions

See also: 11th District Cost of Funds Index + National Monthly Median Cost of Funds Index + Federal Cost of Funds Index

On what day of the month does the COFI rate change?

The COFI value for a given month is generally announced by the Federal Home Loan Bank of San Francisco on the last business day of the following month. Mortgage-X usually publish the COFI on the first business day of the next month. The COFI for January, for example, is usually published on our website on the first business day of March.

My loan is tied to the COFI Index. Will a change in the COFI rate affect my monthly payments immediately?

Please direct this question to your mortgage company.

How is the COFI computed?

The index is the ratio of the month end total interest expenses on savings and checking accounts, advances, and purchased funds for all insured savings and loan institutions in the 11th District to the average book value of these liabilities from the beginning to the end of the month (adjusted with an annualizing factor, rounded to 3 decimal places and expressed as a percentage):

COFI(t) = {I(t)/A(t-1,t)} x (365/d(t)) (365-day year)
COFI(t) = {I(t)/A(t-1,t)} x (366/d(t)) (366-day year)

where:

A(t-1,t) = {L(t−1) + L(t)}/2
I(t) = Total Interest, month t;
L(t)  = the book value of liabilities at the end of month t;
L(t-1)  = the book value of liabilities at the end of month t-1;
A(t-1,t)  = average book value of these liabilities;
d(t) = the number of days in month t.

Why does it lag the Treasury series?

The fact that many COFI-reporting members rely on fixed rate deposits with medium to long-term maturities as a primary source of funds causes a lag in the index because rates on these deposits cannot change until they mature, or are withdrawn. In addition, the index value for a particular month is not reported until the end of the next month (i.e. the COFI has a reporting lag).

The following graph compares the COFI index with the 3-Month T-Bill and the 1-Year CMT and illustrates the trend for the COFI to lag them by several months. The COFI generally doesn't reach the highs and lows of the two other series.

11th District COFI vs. 1-Year CMT and 6-Month T-Bill
11th District COFI vs. 1-Year CMT and 6-Month T-Bill, 1990-2013  { Obtaining Permission to Reproduce }

Please share any potential disadvantage of COFI-indexed ARMs.

The 11th District Cost Of Funds is one of the slowest moving indexes. What if the overall market rates fall suddenly? The lag in the index means that you will start paying above market interest rates. In that case you may want to refinance your loan.

Can you provide historical data on the COFI since inception?

Historical Data Prior to 1990

We have compiled historical values for the COFI starting from January of 1979*.

* The Federal Home Loan Bank of San Francisco first published the 11th District Monthly Weighted Average Cost of Funds Index on August 28, 1981, for the month of July 1981. The values available for earlier years (starting from January of 1979) were extrapolated by the FHLB.

COFI History (1990 - Present)

History of the 11th District Cost Of Funds index.

Is there any other 'Cost of Funds' index available?

There are several other Cost of Funds indexes, besides the 11th District Cost Of Funds, that can be used as benchmarks for some types of mortgage loans and securities:

  • The Federal Home Loan Bank of San Francisco publishes Semiannual Weighted Average Cost of Funds Indexes for Arizona, California, and the 11th District. They are based on the interest expenses of applicable COFI Reporting Members from January through June and July through December each year.
  • Freddie Mac provides the Federal Cost of Funds Index (COFI). It is calculated as the sum of the monthly average interest rates for marketable Treasury Bills and for marketable Treasury Notes, divided by two, and rounded to three decimal places.
  • The Office of Thrift Supervision publishes: National Monthly Median Cost of Funds Ratio, Quarterly Average Cost of Funds and Semi-annual National Average Cost of Funds for OTS-Regulated, SAIF-Insured Institutions.

Can you tell me of any company that deals with COFI-indexed loans? How can I get more information on trying to obtain a COFI loan?

If you are looking for a COFI-indexed ARM and need more information or advice, we invite you to take advantage of our database of the most competitive lenders available. Just complete a short loan request form and the best lenders in your local area will contact you with their rates and fees.


Related Articles:

COFI-indexed ARMs And Their Advantages

Note:

Besides the 11th District Cost Of Funds index lenders may also use the other Cost Of Funds indexes, e.g. National Monthly Median Cost of Funds, Federal Cost of Funds.

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