The Eleventh Federal Home Loan District Cost of Funds Index increased for the second consecutive month in September, this time by more than 2 basis points.The new index stands at 4.383%, its second-highest point of the year, up from 4.359% in August. The only month with a higher index was January, at 4.392%. It was coincidental that the Federal Home Loan Bank of San Francisco, which calculates the index, released it at the close of business on the same day the Federal Reserve Board cut the target federal funds rate by 25 bps. COFI takes into account all sources of funds that thrift members use to originate mortgages, including deposits. Since many financial institutions reduced their prime rate as a result of the Fed's move, it could have an effect on COFI. But since COFI is a weighted average, it lags the overall market by three to six months.

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