Approximations:
§ 60% of deposits are in Checking and Savings accounts
§ 30% of deposits are in the 6 month and 1 year CDs
§ 10% of deposits are in 2 to 5 year CDs

The index represents a weighted average cost of funds and includes long-term accounts-The 11th District COFI is popular with both thrift lenders and borrowers because the index adjusts slowly and stays consistent with those lenders' costs. The most recent index value may be obtained by calling the FHLB Hot line for the 11th District COFI at (415) 616-2600 or by checking the money section of your USA Today.

Why is COFI so stable? History of COFI In 1977, Congress thought it would be a bright idea to deregulate the banking industry, resulting in a rash of speculative lending practices. Among these were wholesale investment in junk bonds, foreign governments and many varieties of commercial real estate ventures. These investments yielded high returns but were of very high risk.

Banks were taking our money and investing it. Due to the liberal banking laws, little banks were popping up all over the place competing for our money. This competition drove the banks cost of funds up. They didn't really care though! They were happy to take our money so they could invest it elsewhere for a higher return. This caused a myriad of problems as people jumped out of the equity markets and into banks. Bank deposits are FDIC insured and gave higher comfort to the general public. As a result of all this, the 11th District Cost of Funds Index increased as the banking industry jumped down the path of no return.

In 1989, Congress got a hold of themselves and re-regulated the banking industry with the passing of a law called FIRREA (Federal Institutions Reform Recovery Enforcement Act.) The government also created an entity call the RTC whose job description included the liquidation of the failing banks and S&Ls. There are now few high cost thrifts and funds and no competition between the banks. Less competition means banks are going to pay us less for our money. Less competition means COFI drops!

Banks are now unable to invest in the same avenues as before due to strict regulation. The FDIC keeps these rates from going too high.

COFI is an average - The COFI is a weighted average of approximately $350 billion in assets. Because it is an average, it doesn't move very fast. This protects the interest rate of a COFI loan from fluctuating quickly.

COFI does not move with other indexes - The Cost of Funds Index loan is not market dependent. In 1994, the Federal Reserve raised rates (7) times. This resulted in the Prime Rate, one year T-Bill and other indexes going up over 3% in a one-year period.

COFI stays low because it is the cost for a bank to do business! Anyone who has had a savings, money market or interest-bearing savings account knows that those rates are low and move very very slowly. The COFI is calculated at the end of every month for the previous month, so it lags the overall market. The COFI's slow, lagging pace benefits borrowers when rates are rising, but not when rates are falling. Therefore, as rates continue their upward trend, the COFI should be looked at more closely due to it's stability as an index.

PARAMETERS OF THE COFI LOAN:
Start Rate up to 80% LTV - 1 month Cofi 1.250% or higher depending on the lender
Start Rate up to 90% LTV - 1 month Cofi 2.250% or higher depending on the lender
Loan Features (may vary from lender to lender): --Up to 89.9 LTV available w/no Mortgage Insurance - however there is an increase to the rate, margin and life cap --40 Year term available--Non-owner Occupied- Up to 95% LTV (Owner Occupied Only)-- Loans up to $3,000,000.00 plus
Margin* From 1.550% to 3.200% (Margins may be higher to accommodate no cost loans)
Life Cap 9.95%
Loan to Value (LTV) - Owner Occupied 95% LTV to $400K, 90% LTV to 1 Million, 75% LTV to 1.5 Million, 70% to 6 Million (FULL DOC ONLY - LTVs MAY BE LOWER FOR REDUCED DOC LOANS)
Loan to Value (LTV) - 2nd Homes 90% LTV to $400K, 80% to $650K, 75% to 1.5 Million, 70% to 6 Million (FULL DOC ONLY - LTVs MAY BE LOWER FOR REDUCED DOC LOANS)
Loan to Value (LTV) - Investment Properties 90% LTV to $400K, 75% to $500K, 70% to $650K (FULL DOC ONLY - LTVs MAY BE LOWER FOR REDUCED DOC LOANS)
*Margin varies depending whether there is a Prepayment Penalty, Lock Length and Points.

MTA-Monthly Treasury Average, COFI-Cost of Funds Index

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