What was the 11th District COFI?
The 11th District Cost of Funds Index (COFI) was a monthly interest-rate benchmark published by the Federal Home Loan Bank of San Francisco. It measured the weighted average cost of funds for eligible savings institutions in the 11th Federal Home Loan Bank District, which covers Arizona, California, and Nevada.
COFI became best known as an index used by some adjustable-rate mortgages (ARMs). Because it reflected institutions' actual funding costs, including deposits and other borrowings, it generally moved more slowly than short-term market rates.
- Historical benchmark: COFI was introduced in 1981 and was widely used in some western U.S. mortgage products.
- Retired benchmark: the Federal Home Loan Bank of San Francisco stopped publishing the monthly index after the December 2021 value, announced in January 2022.
- Legacy contracts: some existing COFI-linked mortgages and securities transitioned to replacement indexes rather than continuing to use the retired series.
- Not a current market index: references to a newly published "11th District COFI" should not be treated as the original FHLBank San Francisco benchmark.
Why was COFI discontinued?
The reporting population used to calculate COFI shrank dramatically over time as the savings-institution industry consolidated and institutions changed charters. By the time the index was retired, there were too few eligible reporting institutions for the Federal Home Loan Bank of San Francisco to continue the series on the same basis.
The retirement was announced in advance so mortgage servicers, issuers, and other market participants could prepare replacement-index language for contracts that still referenced COFI.
How the historical index worked
The original monthly COFI reflected interest expense paid by participating 11th District savings institutions relative to the funds on which that expense was incurred. The result was a weighted-average funding-cost measure rather than a directly traded market rate.
That distinction mattered for borrowers. A COFI-linked ARM could react more slowly to changing market rates because the funding costs embedded in the index included deposits and borrowings with different maturities and repricing schedules.
What replaced the 11th District COFI?
For many legacy mortgage and mortgage-security uses, the transition centered on the Enterprise 11th District COFI Replacement Index, administered by Freddie Mac. Fannie Mae described the replacement as the Freddie Mac Federal Cost of Funds Index plus a spread adjustment and began transitioning affected products after the original COFI ceased publication.
The exact replacement mechanism for an individual loan or security depends on its governing documents. A borrower with a legacy COFI-linked ARM should use the contract and current servicer disclosures rather than assuming every historical COFI loan moved to the same successor rate on the same date.
Why the history still matters
COFI remains useful as a historical example of benchmark risk. A reference rate can become less representative when the population underlying it changes, and contracts tied to a discontinued benchmark need a clear fallback or replacement process.
For current rate analysis, use active benchmarks and primary-source data rather than extrapolating the retired COFI series.
Primary sources
- Fannie Mae: Details on COFI Replacement Indices
- Fannie Mae: Reminder of COFI Replacement Indices
- Fannie Mae: Replacement for COFI Index
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