There has been another five basis point decline in the Eleventh Federal Home Loan District Cost of Funds Index between August and September, but the index is still higher than its record low set 11 months ago.\\
For September, the index was 1.663%. The index for August 2010 was 1.713%.
COFI was designed by the Federal Home Loan Bank of San Francisco to be a lagging indicator, as it is a weighted average of what it costs members to obtain funds to originate mortgages.
Last October, COFI bottomed out at a record low of 1.259%, but the next month zoomed above 2% as Wachovia Mortgage FSB, now a part of Wells Fargo, was removed as an eligible member of FHLB-SF. A note states removing a large institution from the calculation could have a significant impact.
In September, there were total average funds of $36 billion and total interest expense of $49.9 million; in August, the calculation used total average funds of $36.6 billion and total interest expense of $52.2 million.
Part of the source for mortgage money is deposits, and according to data from the Federal Reserve Bank of St. Louis, while certificate of deposit rates are not at record lows, they are still well below the 1% mark.
The secondary market rate for the one-month CD for September is 0.24%, down one basis point from August and nine basis points lower than its most recent peak of 0.33% for both May and June.
There was a wider drop off for the three-month CD, four basis points to 0.28% between August and September; it is down 24 basis points from its June peak.
Between August and September, there was a six basis point decline in the six-month CD, to 0.38. Since its peak in June, it has declined by 37 basis points.
