For the second time in the past three months, the Eleventh Federal Home Loan District Cost of Funds Index has increased from a record a low.The index for February, as calculated by the Federal Home Loan Bank of San Francisco, stood at 1.841%, up 3 basis points from its all-time low of 1.811% in January. In December, the index climbed to 1.902% from its then-record low of 1.821%. COFI is one of several popular indices that are used to index adjustable-rate mortgages. Industry observers have noticed an increase in adjustable-rate mortgage activity since the beginning of the year, aided by the extremely low starting rates for ARMs. The Freddie Mac Primary Mortgage Market Survey for March 25 found that the one-year Treasury ARM had an average start rate of 3.36%, the lowest in survey history. The company recently announced changes to the Seller/Servicer guide that would make it easier to sell certain ARM products -- most notably loans indexed to the London interbank offered rate -- by making them a standard product.

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