What does COFI stand for in relation to mortgage interest rates?

COFI stands for Cost of Funds Index. This term is significant in the context of mortgage interest rates as it represents a benchmark used to establish adjustable-rate mortgage (ARM) rates. The Cost of Funds Index reflects the cost incurred by lenders to obtain funds, which typically includes the interest expenses associated with savings accounts, certificates of deposit, and other sources of financing.

Lenders use the COFI to adjust interest rates on ARMs, meaning that as the cost of funds increases or decreases, so too will the interest rates on the mortgages tied to this index. This index is influential because it provides a transparent and measurable way to ensure that interest rates reflect current market conditions, affecting borrowers' monthly payments.

The other options provided do not align with standard financial terminologies or recognized indices within the mortgage lending industry, making them less relevant when discussing mortgage interest rates.