Details on COFI Replacement Indices
Updated as of March 24, 2022
It is widely known that the 11th District Monthly Weighted Average Cost of Funds Index (COFI) will cease being published after January 31, 2022. Fannie Mae has previously shared details regarding COFI s replacement index in an announcement, Playbook, and FAQs. Today, we are reminding the market of transition details for each of Fannie Mae's impacted securitization products and sharing new information regarding a subset of Single-Family adjustable-rate mortgages (ARMs).
- Once COFI is no longer available, many Single-Family COFI-indexed ARMs will move to a new replacement index that will be administered and published by Freddie Mac. The new index, the Enterprise 11th District COFI Replacement Index ("Ent 11th COFI Repl"), will be published here on the last business day of every month beginning on February 28, 2022 (for the month of January 2022). The existing subtypes and index codes will be updated with the new replacement index description.
- There is a population of Single-Family COFI-indexed ARMs that will transition to the Constant Maturity Treasury (CMT) index1 as specifically stated in those loans' mortgage notes. Upon transition, for certain Single-Family Mortgage-Backed Securities where the majority of the ARM loans convert to CMT:
- The index code will change from "021 – FHLBB 11th District Cost of Funds (Monthly Avg)" to "006 – Cumulative Average for the Previous 12 Month 1-year Treasury Security (monthly average)2"; and
- The subtype will change. The table below maps the original subtype to the new subtype.
- For both Single-Family populations above, there is a portion of loans for which the mortgage margins will change, as specified in the loans' mortgage notes. Correspondingly, the MBS margin for these loans will also change.
- Once COFI is no longer available, Multifamily COFI-indexed ARMs will move to a new replacement index that will be administered and published by Freddie Mac. The new index, the Enterprise 11th District COFI Institutional Replacement Index ("Ent 11th COFI Inst Repl"), will be published here on the last business day of every month beginning on February 28, 2022 (for the month of January 2022). The existing subtypes will be updated with the new replacement index description.
- COFI-indexed CMOs contain waterfall fallback language specifying that the replacement index once COFI is no longer available is the one-year3 LIBOR. Since the anticipated index cessation date for one-year3 LIBOR is June 30, 2023, it is currently anticipated that these COFI-indexed CMOs would switch to a replacement index for 1-Year LIBOR (the Secured Overnight Financing Rate, "SOFR") after June 30, 2023.
Visit Fannie Mae's COFI Playbook and FAQs to learn more about the COFI transition, including additional details on the spread adjustment and recommended actions for stakeholders to consider as they manage the transition. Visit Freddie Mac's website for downloadable test data for the Ent 11th COFI Repl and the Ent 11th COFI Instl Repl, including a training video that serves as a job aid.
1 As a reminder, Fannie Mae ceased acquiring new Single-Family ARM loans that use an index based on CMT and retired all CMT ARM plans earlier this year. View the Lender Letter LL-2021-05, Retirement of CMT Adjustable-Rate Mortgage Products for additional details.
2 This was updated on March 24, 2022, to reflect the updated replacement index for this population of Single-Family ARMs announced here. When this announcement was originally published, this population of Single-Family ARMs was noted as transitioning to the one-year CMT Monthly Average.
3 This was updated on March 24, 2022 to reflect the updated index term as noted in the COFI Playbook. When this announcement was originally published, Single-Family CMOs/REMICs were noted as transitioning to the one-month LIBOR.
This announcement does not constitute an offer to sell or the solicitation of an offer to buy securities of Fannie Mae. Nothing in this announcement constitutes advice on the merits of buying or selling a particular investment. Any investment decision as to any purchase of securities referred to herein must be made solely on the basis of information contained in Fannie Mae's applicable Prospectus and the Prospectus Supplement and the related legal documentation, and no reliance may be placed on the completeness or accuracy of the information contained in this announcement.
You should not deal in securities unless you understand their nature and the extent of your exposure to risk. You should be satisfied that they are suitable for you in light of your circumstances and financial position. If you are in any doubt you should consult an appropriately qualified financial advisor.