DECEMBER 12TH, 2018

12-MTA Mortgage Loans

12-MTA is an acronym for the 12 Month Treasury Average. One of the newer indexes, and is the 12-month average yields of US Treasury securities. Consumers desiring a newer alternative to COFI, will likely be interested in this program. It tends to fluctuate slightly more than COFI although their typical movements are quite similar. Alert: As with COFI, the 12-MTA has potential for Negative Amortization. Negative Amortization may increase a consumer’s loan payment substantially if interest rates rise significantly.

MTA is sometimes referred to as a 12-Month Moving Average Treasury or MAT.

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About 12-MTA Mortgage Loans

Mortgage Loans that Use 12-MTA?
A 12-MTA Mortgage can be utilized just as any other ARM. Being an ARM, consumers can enjoy the advantage of the 12-MTA Index fluctuations. Note: Similar index alternatives to 12-MTA’s are COFI, COSI, and LIBOR. – See bottom of page for details on these Indexes.

Benefits of 12-MTA Mortgages?
Consumers have the option of when they pay they pay larger/smaller payments. Should the consumer have broad variances in their income, a 12-MTA may present itself to be a decision-making factor for the consumer. A consumer’s first three months of payments are set at a low, fixed-rate. Upon reaching the fourth month, the consumer may choose to: 1) pay just the interest, 2) pay the interest AND principal or, 3) else pay less than the actual interest each month. This last option does keep the monthly payment quite low. This program provides borrowers maximum flexibility as well as control in their repayment plan.

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With a 12-MTA Index, Will a Consumer’s Interest Rate Only Change Yearly?

No. It will change on a monthly basis like other ARMs. The “12 Month” part simply refers not to an average of the calendar year – BUT to the average of the twelve months previous to the one the consumer is in.

• 12-Month Treasury Average – (MTA/MAT). The MTA is most widely utilized on Option ARM loan index. AKA is 12-Month Moving Average Treasury index (MAT) is a relatively new ARM index. ARMs tied to the MTA index may have the potential for “negative amortization”.

• 11th District Cost of Funds Index (COFI). The COFI index reflects the weighted-average interest rate paid by the 11th Federal Home Loan Bank District savings institutions. COFI index is the slowest moving, yet most stable of all ARM indexes. COFI index is one a popular and common ARM index, used primarily for ARMs with monthly interest rate adjustments. COFI is one of the most commonly used Option ARM indexes.

• Cost of Savings Index (COSI). The COSI index is the “weighted-average” of the rate of interest on the deposit accounts of the federally-insured depository institution subsidiaries of Golden West Financial Corp. (GDW). All depository subsidiaries of GDW operate under the name of World Savings. The COSI index is considered to be among the most stable ARM indexes in the industry and it is one of the more commonly used Option ARM loan indexes.

• London Inter Bank Offering Rates (LIBOR). LIBOR is an average of the interest rate on dollar-denominated deposits, it follows world economic conditions. Different LIBOR rates are used widely as ARM indexes.

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