The Eleventh Federal Home Loan District Cost of Funds Index for August is at its lowest point since February, at 1.713%. That is a drop of four basis points from July's 1.753%, but 30 basis points higher than it was last August.
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 August, the calculation used total average funds of $36.6 billion and total interest expense of $52.2 million; in July, FHLB-SF used $37.8 billion and $55.2 million.
For comparative purposes, the monthly average commitment rate for a 30-year fixed-rate mortgage, according to the Freddie Mac Primary Mortgage Market Survey, peaked in April at 5.10%. By August it was down to 4.43%, and down to 4.35% in September.
The PMMS for the one-year adjustable has been going downward all year, starting at 4.33% in January to 3.53% in August and 3.46% in September. In September 2009, it was at 4.59%.
