Strange Mortgage Indexes Continue The Housing Market Hold-Down

admin — Tue, 09 Feb 2010 00:52:46 +0000

Many homeowners with variable mortgages have watched their monthly payments increase or stay high even as they have dropped for others. Why is this? The answer points toward the obscure indexes used to calculate those payments moving in unexpected ways. These indexes behave in strange ways, which have controlled monthly payments on more than $100 billion of variable mortgages, means that many homeowners are paying as much as 25% more than homeowners with similar loans. The higher payments, which can total $269 a month on a $250,000 loan, come as many homeowners are struggling to avoid default.

Few homeowners have heard of or understand these indexes, which have acronyms like Cosi, Codi and Cofi, along with the better-known Libor. And few know how they are calculated or what they mean for borrowers. The mortgage loans are pegged to the indexes because the loans, unliked fixed-rate loans, adjust to changing market moves. Learn More

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Strange Mortgage Indexes Continue The Housing Market Hold-Down