Question:

What is the most used Option ARM index?

Answer:

The most popular Option ARM index is MTA (Monthly Treasury Average), also known as the 12-Month Moving Average Treasury index (MAT).

Another popular Option ARM index to use is the 11th District Cost of Funds Index (COFI).

Both MTA and COFI are ARM indexes that allow for negative amortization and this is the reason Option ARM mortgage loans are usually tied to one of them. However, other Option ARM indexes are COSI and LIBOR, although they are more rarely used.

MTA and COFI are ARM indexes that change a lot more slowly than other ARM indexes. MTA is a 12-month average of the 1-Year CMT, and COFI is a 2-month lagging index. They smooth out a lot of the changes associated with ARM indexes. COFI and MTA are the preferred Option ARM index for 1- or 3-month adjusting ARMs and are the top choice when market rates are going up.

COSI and LIBOR display a lot more volatility and are great when market rates are going down, since your mortgage payment will go down following the rates.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
Link:
Why: Because FHA loans are insured by the US Federal Government they have very competitive interest rates and are easier to qualify.
Link:
Why: Know and protect your credit report and score.
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
Why: Find your next home and save money.
Link: Search thousands of foreclosures. Free 7-day trial.
Link this QnA Print del.icio.us Digg
Was this Mortgage QnA helpful?
Not at all
  • Currently 3.1/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
 Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA:

Common misspellings: mortage and morgage