What is the Cost of Funds Index?
The Cost of Funds Index (COFI) is a weighted average cost of funds Index representing the average interest expenses incurred by COFI members, which can only include banks in Arizona, California, & Nevada. Interest expenses include the following types of accounts: savings, checking, CD’s, money market, transaction, and passbook. COFI is an annualized ratio of monthly interest expenses in proportion to the total funds on hand. It is not an interest rate but rather, it is a benchmark index used as a basis to calculate the interest rate on mortgage products such as ARMs. COFI & Market Interest Rates The cost of funds index can be influenced by a number of factors; including changes in the market interest rates, M&A activity, and changes in the source of funding for purposes of calculating interest expense. COFI member banks sometimes employ medium to longer term debt funding, making the index less susceptible to changes in short term interest rates. Additionally, M&A activity can have an i
This is a oft asked question by people who’s ARM just went adjustable. Now they want to know all they can about how their interesti ratei is calculated. If this is the reason why you are here, then we recommend that you refinance your loan and get out of that ARM. Basics Simply put, the Cost of Funds Indexii (COF) (also known as the 11th District Cost of Funds) is a monthly weighted average that is published by the Federal Home Loan Bank of San Francisco. The COF has been published every month since August 1981. Very few people understand what the COF represents, what affects it or even how the COF is calculated. We will try to provide some information without getting too technical. History Before the monthly 11th District COF Index was published there was the semiannual weighted average COF. The first issue covered January through June and the second July through December. Trivia Tidbit: The Federal Home Loan Bank of San Francisco was the first Federal Home Loan Bank to publish a COF
