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The index which governs my ARM disappeared. What happens now?

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Q: Since the OCC stopped posting data in 2012, what ARM index is a good replacement for the old FHLBB "monthly median cost of funds” ratio, annualized, percent?

A: This phenomena happens from time to time, as various esoteric financial indicators come and go with changes in the market. In this case, your index was put together by looking at deposit costs at thrifts (a.k.a. Savings and Loans). Banks with these kinds of charters have been fading from the landscape as many have converted to other corporate forms, including state and nationally chartered banks. Some notables no longer with us include Washington Mutual and World Savings, just to name two.

In a case where an index is no longer produced, the regulator who oversees the process will usually find or produce another indicator which performs essentially the same function. In this case, the “Monthly Median Annualized Cost of Funds” was discontinued when the regulator (the Office of Thrift Supervision) was merged into the Office of the Comptroller of the Currency in 2011. The index which replaces the old MMACOF is called the “Federal Cost of Funds”; this is produced by Freddie Mac each month and is based on the government's borrowing costs, rather than a specific industry.

About the author:

KTGA 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.

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