Your Guide to Credit and Personal Finance

With so many choices for available mortgage indices, it’s only natural that borrowers would wonder which is the best, or what are the pros and cons of what’s out there. Toward offering a useful comparison, here’s a brief description of each, and the advantages which some offer…

LIBOR (London Interbank Overnight Rate)
This index sometimes offers the most enticing start rate of all the indices. And, some loan representatives will use that feature to attract you to whatever loan program they’re pushing. If you’re mortgage shopping, and you state you want the lowest rate for an arm (adjustable rate mortgage), chances are this will be the index your rate is tied to for its periodic adjustment.

Now, at Mortgage Match, it’s NOT a mortgage index we would usually recommend. While it can very often have that nice, low-rate feature, it’s also the most volatile index. Susceptible to frequent movement, and in large increments when it does move, it’s definitely not for the faint-of-heart… as it can rise and fall rapidly.

MTA (Monthly Treasury Average)
Even though the popular “12 MAT” mortgages can be tied to any one of these indices, it gets its “nickname” (MTA or MAT) from this index. The 12-month Treasury Average index (12-MTA) is based on average yields on U.S. Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve. The 12-month average is determined by adding together the annual yields for the most recently available 12 months and then dividing by 12.

Even when other rates increase, the 12-MTA can often continue to decline for several more months, because the 12-MTA is calculated as a 12-month moving average. As a result, it takes longer for interest rate increases to affect this calculation; as lower values throughout the 12-month period keep index increases in check.
The 12-MTA index offers a low rate, stability and is overall a good choice.

COSI (Cost of Savings Index)
The COSI index represents the average of interest rates certain banks pay to common customers on checking, savings and CD accounts. The COSI index has remained low and stable, because it’s not based on the fluctuating economy.

The COSI index consists mainly of yields of bank’s CD rates in the 11th District, and the Fed Fund Rate. Thus, the prime rate really doesn’t affect this index. Mortgages tied to the COSI index are extremely stable and exhibit very low volatility. This is the index Mortgage Match recommends most often, with the 12-MTA following closely in 2nd place.

COFI (Cost of Funds Index)
This index reflects the weighted-average interest rate by the 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the Federal Home Loan Bank, and other sources of funds. The 11th District consists of Savings & Loans and Savings Banks headquartered in Arizona, California and Nevada.

Since the largest part of the COFI is interest paid on savings accounts, this index trails market interest rates in both upward and downward trend movements. As a result, ARMs tied to this index rise and fall more slowly than interest rates in general, which is good if a rates are rising, and not so good if rates are falling.

CODI (Cost of Deposits Index)
A CODI loan is based on a 12-month rolling average of the monthly yields on the nationally-published, 3-month CD rates. The investor or lender takes the last 12 monthly CD values and averages them together. Each month a new value is added to the oldest month. Averaging helps reduce the volatility which is often a property of flexible-type indices.

The CODI program works the same as the COFI and COSI programs, except the margins for CODI mortgages are slightly higher, and the index is slighly more volatile.

Mortgage Match will help you obtain the lowest rate based on the most stable index of your choosing for all types of mortgages for both owner-occupied and non-owner-occupied (NOO) properties across the USA… including the popular 12 MAT, Pick-A-Payment mortgage.

To see the most up-do-date, national daily averages for the LIBOR, MTA, COSI and COFI indices, plus many more mortgage rates, click here.

For more on 12 MAT, pick-a-payment mortgages see…
New 12 MAT LTVs and FICOs.
Now there’s a zero down 12 MAT.
12 MAT mortgages… often misunderstood.
Libor vs. MTA vs. COSI and more… common indices for 12 MATs.
The 12 MAT… for mortgages with more control.
The 12 MAT in depth.
Refinancing with the 12 MAT.