COFI Rises for 1st Time in '98

For the first time this year, the Eleventh Federal Home Loan District Cost of Funds Index has increased, rising three basis points from June to July.The index for July is 4.911%, while in June it was 4.881% for the second consecutive month. Traditionally, COFI has been a lagging index -- when other indices were rising, COFI would still be declining for several months. When the last big originations wave ended in 1994, COFI loans became a popular product for West Coast-based thrift lenders because the index was still falling. However, mortgage industry reports showed July was a strong month for many originators. What remains to be seen, therefore, is whether the July rise in COFI is a temporary blip or whether COFI can still be considered a lagging indicator. The index reflects the interest paid by savings institutions in Arizona, California, and Nevada on their sources of mortgage money. There is concern by some observers that the relevance of the index has been affected by the acquisition of large California thrifts by institutions based outside the state.