One of the most stable indexes along with the MTA is the 11th District COFI, so named because it measures the weighted average of interest rates paid by the 11th District of the Federal Home Loan Bank District headquartered in California, Arizona and Nevada. It is stable because banks pay interest mostly on savings accounts, and we don’t have to tell you how slowly they change the interest rates!

11th District COFI Index Adjustable Rate ARMs are very popular in ARM mortgages whose rates adjust every month, and a large percentage of minimum payment option ARM mortgages use this index. While traditionally slow to react to volatility I the market, the COFI index is at a 4 year high and a side effect of its stability is that it is much slower to react to lower market interest rates. That means if you are in a COFI index ARM mortgage which is in its fixed period, you could be in for a shock when your fixed period ends and the ARM makes its initial adjustment, because the rates are much higher today than when you took your mortgage out, and also because any downward trends in rates do not reflect as quickly, locking you into this higher payment much longer. A COFI indexed ARM may make sense if you have a long fixed period, but the ability for the loan to adjust monthly may not be desirable to some borrowers after the fixed period is over. Many borrowers in COFI index ARM mortgages are seeking to refinance before their rate becomes adjustable, however have found that fixed rate mortgages often lack the payment options available in their COFI Index ARM. The solution may be to refinance into a new 30 year fixed mortgage with a minimum payment option capability or to seek a COFI or MTA option ARM with a long initial fixed period of 3 or 5 years.