LIBOR and COFI are both indices that measure interest rates that reflect trends in the overall economy. Both indices are published by third parties and are used as a benchmark for interest rate changes. Different lenders use different indices for their adjustable rate mortgage as well as lines of credit. In some cases, your promissory note will indicate whether your loan’s interest rate is adjusted pursuant to LIBOR or COFI.
LIBOR is the London Interbank Offered Rate and may be the current index used to determine the interest rate change on your loan, depending on your loan documents. LIBOR is set to be discontinued as a published, referenced rate. LIBOR is tied to a multitude of financial instruments, including residential mortgage loans and securitizations. LIBOR-referenced rates are relevant to Specialized Loan Servicing (SLS) as part of the underlying terms of certain mortgage products serviced, and the financing terms on the mortgage loan originations.
COFI is the Cost of Funds Index and is an alternative index which may be used for rate changes, depending on the terms of your loan. The Federal Home Loan Bank of San Francisco also announced that it will stop publishing COFI in early 2022. COFI is a weighted average of what it costs banks to pay interest on savings accounts or on money borrowed from other financial institutions and is tied to many residential mortgage loans.
Please consult your promissory note to determine if your loan adjusts pursuant to LIBOR or COFI. If your loan adjusts pursuant to either LIBOR or COFI, an alternative index will need to be substituted prior to expiration. If your loan is affected, we will contact you to ensure you are aware of the new index chosen.