COFI Jumps

For the first time since April, the Eleventh Federal Home Loan District Cost of Funds Index has recorded a double-digit increase.The index for August stood at 2.870%, up slightly over 11 basis points from its level in July, as compiled by the Federal Home Loan Bank of San Francisco. The index is nearly a full percentage point higher than it was for August 2004. COFI is a weighted average of what the member savings institutions of the FHLBank pay for funds (including deposits) used to originate mortgages. In turn, a number of institutions, especially on the West Coast, use COFI to index adjustable-rate mortgage loans. By using a weighted average, COFI is believed to lag the market by three to six months and provide a cushion in situations where there might be payment shock for borrowers.