The Federal Home Loan Bank of San Francisco (FHLB of San Francisco) recently announced that it will discontinue publishing certain cost of funds indices, including the 11th District Weighted Average Cost of Funds Index (COFI). (The FHLB of San Francisco is the 11th District in the FHLB system.) Certain mortgage lenders use the COFI as the index for their adjustable rate mortgage loans.
Explaining the reason for the discontinuance, the FHLB of San Francisco advised that when the COFI was developed in 1981 there were more than 200 savings institutions that reported cost of funds data to the FHLB, and now there are only nine. The FHLB will cease the calculation and publication of the COFI after the publication of the December 2019 COFI on January 31, 2020.
Lenders still using the COFI will need to use a different index both for existing loans and for future originations. The eventual discontinuance of the London Interbank Offered Rate (LIBOR) index will have a much greater effect on the mortgage industry, and the financial industry in general, as that index is more widely used by lenders than the COFI.
