Cost of Funds Index (COFI)
The 11th District Cost of Funds is more prevalent in the West
and the 1-Year Treasury Security is more prevalent in the East.
Buyers prefer the slowly moving 11th District Cost of Funds
and investors prefer the 1-Year Treasury Security.
The monthly weighted average Eleventh District
has been published by the Federal Home Loan Bank of San Francisco
since August 1981. Currently more than one half of the savings
institutions loans made in California are tied to the 11th District
Cost of Funds (COF) index.
The Federal Home Loan Bank's 11th District is
comprised of saving institutions in Arizona, California and
Nevada.
Few people who use and follow the 11th District
Cost of Funds understand exactly how it is calculated, what
it represents, how it moves and what factors affect it.
The predecessor to the 11th District Cost of
Funds index was the District semiannual weighted average cost
of funds published for a six month period ending in June and
December. The San Francisco Bank was the first Federal Home
Loan Bank to publish a monthly cost of funds index.
The funds used as a basis for the calculation
of the 11th District Cost of Funds index are the liabilities
at the District savings institutions: money on deposit at the
institutions, money borrowed from a Federal Home Loan Bank (known
as advances) and all other money borrowed. The interest paid
on these types of funds is the cost of these funds.
The ratio of the dollar amount paid in interest
during the month to the average dollar amount of the funds for
that month constitutes the weighted average cost of funds ratio
for that month.
The average cost of funds is said to be weighted
because the three kinds of funds and their costs are added together
before a ratio is computed rather than calculating averages
individually for the three sources and using a simple average
of the three ratios. This gives the greatest weight to the interest
paid on deposits, and explains the delayed reaction of the index
to rising fixed-rate mortgages.
Compare
Programs
The right type of mortgage for you depends on many different
factors. Or, Apply Now!
