FHLB Cost of Funds Index Drops in June

The Cost of Funds index for savings institutions in the 11th Federal Home Loan Bank District fell to 4.853% in June from 4.864% in May, the FHLB said. The index measures the interest paid by thrifts in the district on deposits, advances from the FHLB and more-costly purchases of short-term funds. It is also used as a base rate for West Coast mortgages and, therefore, for bonds backed by those loans. A drop in the index, called COFI, raises the disposable incomes of homeowners who have adjustable-rate mortgages by reducing their monthly mortgage payments. For bondholders, a drop in the index reduces the interest they receive in their adjustable-rate mortgage securities. The June index announced by the San Francisco-based FHLB will be in effect through August. The 11th District consists of California, Arizona and Nevada.