Understanding the 11th District Cost of Funds Index (COFI) and Its Influence on Mortgage Dynamics

11th District Cost of Funds Index (COFI)
11th District Cost of Funds Index (COFI)Its Influence on Mortgage Dynamics

The realm of mortgages often appears intricate and daunting to many. With a multitude of choices ranging from fixed-rate mortgages to adjustable-rate mortgages (ARM), navigating the loan landscape for a home can be daunting. Within this array of options, one finds the 11th District Cost of Funds Index (COFI), a crucial factor influencing interest rates for ARMs in the western United States.

Let's explore the essence of the 11th District COFI, its mechanics, and its significance in detail.

What exactly is the 11th District COFI? 

This isn't merely another obscure financial term; it holds substantial influence over mortgage interest rates, especially in the western United States.

COFI stands for the Cost of Funds Index, reflecting the average interest rates paid on checking and savings accounts by financial institutions in Arizona, California, and Nevada.

Calculated monthly by the Federal Home Loan Bank of San Francisco, it offers valuable insights into the cost of funds for savings institutions in the Western region.

11th District Cost of Funds Index (COFI)
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How does the 11th District COFI function? 

Released on the last day of every month, it mirrors the cost of funds for savings institutions affiliated with the Federal Home Loan Bank of San Francisco. This regulatory body establishes membership criteria for inclusion in the index.

The calculation of COFI is multifaceted, with interest payments on savings accounts being the most influential factor. As a result, the index typically responds gradually to fluctuations in market interest rates, making it a lagging indicator.

Why is COFI relevant for mortgages?

You might ask, "Why does it matter if I'm not a banker?" Well, if you're in the market for a mortgage, particularly an ARM, grasping the significance of COFI is paramount.

ARM mortgages entail interest rates that adjust periodically, often linked to an index such as COFI. Consequently, fluctuations in COFI could potentially lead to changes in your mortgage rate.

However, it's crucial to understand that your mortgage rate won't perfectly align with COFI. Lenders typically establish ARM rates to exceed COFI by a certain margin, influenced by variables such as credit history, loan size and duration, negotiation terms, and numerous other factors.

COFI versus Other Indices

While COFI dominates in the western U.S., different regions have their preferred indices. For instance, in the eastern U.S., the 1-year Treasury index carries more weight. This regional variation highlights the significance of knowing which index influences your mortgage if you're contemplating an ARM.

11th District Cost of Funds Index (COFI)
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Recent Developments

In March 2018, the COFI registered at 0.814%, a marginal decrease compared to the previous month. Although seemingly insignificant, such adjustments could impact mortgage borrowers in the Western states. Even minor shifts in COFI have the potential to impact the interest rates on ARMs, potentially altering borrowers' monthly payments.


In conclusion, the 11th District Cost of Funds Index isn't merely a cryptic financial term; it holds significant importance in determining the interest rates on adjustable-rate mortgages, especially in the Western United States.

Understanding the mechanics of COFI and its effects on mortgage rates can equip borrowers with the knowledge needed to make informed decisions in the intricate realm of home financing. Hence, the next time you hear about COFI, you'll understand precisely why it's relevant.

11th District Cost of Funds Index (COFI)
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