COFI Transition Playbook

March 2022
1

Table of Contents

1. Overview .................................................................................................................................................4

1.1 Introduction.................................................................................................................................4

1.2 COFI transition timelines ...........................................................................................................4

1.3 Actions market participants should consider .........................................................................5

2. Single-Family and Multifamily ARMs...................................................................................................6

2.1 Introduction.................................................................................................................................6

2.2 Spread adjustment methodology for the Enterprise 11th District COFI Replacement 

Index 6

2.3 Spread adjustment methodology for the Enterprise 11th District COFI Institutional 

Replacement Index .................................................................................................................................8

2.4 Scenarios for COFI-indexed ARMs transition...........................................................................9

2.5 Servicing SF and MF ARMs ........................................................................................................12

2.6 Administration of SF and MF MBS/PC .....................................................................................14

3. Collateralized Mortgage Obligations.................................................................................................15

3.1 Introduction...............................................................................................................................15

3.2 Administration...........................................................................................................................15

4. Appendix ...............................................................................................................................................17

4.1 Appendix A: Example of the Enterprise 11th District COFI Replacement Index one-year 

transition period ...................................................................................................................................17

4.2 Appendix B: Spread adjustment scenarios ............................................................................18

4.3 Appendix C: Example of the Enterprise 11th District COFI Institutional Replacement 

Index 19

5. Summary of Prior Changes .................................................................................................................21
2

Summary of Changes

The table below details the list of changes since the February 2022 version of the COFI Playbook 

published on the Fannie Mae and Freddie Mac websites.

Section Summary of Changes

All sections ▪ Updated table formatting

3. Collateralized 

Mortgage Obligations

▪ Updated Footnote 13 to indicate the LIBOR tenor used as a fallback by 

Collateralized Mortgage Obligations indexed to COFI is one-year LIBOR 

rather than one-month LIBOR
3

Legal information and disclaimer

Information related to the transition away from the 11th District Monthly Weighted Average Cost of 

Funds Index (“COFI”) produced by the Federal Home Loan Bank of San Francisco (“FHLB SF”)1is 

contained in this COFI Transition Playbook. The information in this document pertains specifically and 

only to the transition away from COFI. Nothing in this document should be interpreted as having any 

bearing on or implications for transitions away from other reference rates such as LIBOR. This 

material is subject to revision and updates as deemed necessary or appropriate. The analyses, views 

and opinions expressed herein are based on certain assumptions that also are subject to change. 

Readers should rely on the information contained in the loan documentation, securities offering 

documents, and operative documents to evaluate the rights and obligations for each such loan or 

security. As a reminder, Fannie Mae and Freddie Mac (each, a “GSE” and collectively, the “GSEs”) are in 

separate conservatorships and their conservator, Federal Housing Finance Agency (“FHFA”), has the 

authority to direct either or both GSEs to take whatever actions it deems appropriate in respect of any 

COFI transition and product or contract.

Neither GSE guarantees the accuracy or completeness of information that is contained in this 

document, or that the information is appropriate or useful in any particular context, including the 

context of any investment decision, and it should not be relied upon as such. No representations or 

warranties are made as to the reasonableness of the assumptions made, or the accuracy or 

completeness of any information contained, herein. All opinions and estimates are given as of the 

date hereof and are subject to change and neither GSE assumes any obligation to update this 

document to reflect any such changes. The information herein is not intended to predict actual results 

and no assurances are given with respect thereto. No representation is made that any strategy, 

performance, or result illustrated herein can or will be achieved or duplicated. The effect of factors 

other than those assumed, including factors not mentioned, considered or foreseen, by themselves or 

in conjunction with other factors, could produce dramatically different performance or results.

Nothing herein will be deemed to constitute investment, legal, tax, financial, accounting or other 

advice. No part of this document may be duplicated, reproduced, distributed or displayed in public in 

any manner or by and means without the written permission of Fannie Mae and Freddie Mac.

This playbook does not constitute an offer to sell or the solicitation of an offer to buy securities of 

either GSE. Nothing in this playbook 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 based on information contained in the respective GSE’s applicable offering documents, and no 

reliance may be placed on the completeness or accuracy of the information contained in this 

playbook. 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 considering your circumstances 

and financial position. If you are in any doubt you should consult an appropriately qualified financial 

advisor.

1 See https://www.fhlbsf.com/resources/cofi
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1. Overview

1.1 Introduction

❖ Playbook purpose and scope

The GSEs have published this COFI Transition Playbook as a reference for transitioning the following 

COFI-indexed products to a replacement index:

• Single-Family (“SF”) and Multifamily (“MF”) Adjustable-Rate Mortgages (“ARMs”) 

• Collateralized Mortgage Obligations (“CMOs”)

This playbook describes key transition milestones and recommended actions for stakeholders to 

consider as they manage the transition from COFI. This document serves as a tool to help adapt 

business policies, procedures, and processes for discontinuation of COFI as an index for existing COFI

mortgages. 

GSEs have been working together on several aspects of the COFI transition. Where appropriate, the 

GSEs have aligned policies and milestones.

FAQs on each GSE’s COFI transition are published on Fannie Mae and Freddie Mac webpages.

Please direct any additional questions to your Fannie Mae or Freddie Mac account management 

teams.

❖ Why is there a need to transition from COFI?

The administrator of COFI, the FHLB SF, announced it would cease publishing COFI after January 31, 

2022 due to a significant decline in the number of financial institutions eligible to provide data for the 

calculation of COFI. When the monthly COFI was originally developed in 1981, there were over two 

hundred COFI reporting members. The number of panel banks has decreased substantially since the 

2008 financial crisis and was reported at nine panel banks as of May 2020.

2

1.2 COFI transition timelines

The FHLB SF ceased publication of COFI after the publication of the December 2021 COFI on January 

31, 2022. As described in greater detail in Section 2, Freddie Mac began publishing replacement 

indices for most COFI-indexed SF and MF ARMs3, Freddie Mac PCs, Fannie Mae MBS and Freddie Mac 

CMOs4 on a monthly basis, starting with the January 2022 indices on February 28, 2022. Changes to 

COFI affects legacy transactions only. Fannie Mae and Freddie Mac no longer purchase COFI-indexed 

ARMs, nor issue COFI-indexed CMOs.

2 Cost of Funds Indices, FHLB SF.

3 Certain agreements held by Fannie Mae specify a replacement index if COFI is no longer available; in those cases, the 

specified replacement index will be the fallback rather than a replacement index published by Freddie Mac.

4 The replacement index for Fannie Mae COFI-indexed CMOs will be based on the fallback language in the governing 

prospectuses.
5

Figure 1-1: COFI transition timeline

1.3 Actions market participants should consider

As of February 28, 2022, new values of COFI are not available for any products. Lenders, servicers, 

investors and other relevant parties should have taken the necessary steps from a systems, process 

and training perspective to transition products from COFI to a replacement index.

❖ Accounting and tax considerations

The transition may have an impact on the accounting treatment for existing contracts, hedge 

accounting relationships or other transactions that reference COFI. All stakeholders should have 

addressed identified impacts due to the transition from COFI.

❖ Compliance considerations

The transition of legacy COFI-indexed transactions may involve compliance risk related to disclosure.

Both GSEs maintain processes which provide reasonable assurance that they comply with applicable 

disclosure laws and regulations.
6

2. Single-Family and Multifamily ARMs

2.1 Introduction

COFI-indexed ARMs are impacted by FHLB SF’s decision to cease publication of COFI after January 31, 

2022.

On April 27, 2021, the GSEs announced their selection of the Enterprise 11th District COFI 

Replacement Index (“Ent 11th COFI Repl”) as the replacement index for their COFI-indexed SF ARMs 

following the cessation of COFI.

5 Ent 11th COFIRepl, which is comprised of the Federal Cost of Funds 

Index (“Federal COFI”) plus a spread adjustment, gradually transitions to the five-year historical 

median spread between COFI and Federal COFI over a one-year phase-in period. The GSEs made this 

announcement in April to allow market participants adequate time for operational readiness, 

borrower notices and education, and compliance with the notes and applicable law, among other 

reasons. The GSEs believe Ent 11th COFI Repl is a comparable replacement rate for and successor to 

COFI for SF ARMs.

The replacement index for MF ARMs, the Enterprise 11th District COFI Institutional Replacement Index 

(“Ent 11th COFI Inst Repl”), does not include a one-year phase-in period; rather, the spread 

adjustment is immediately and invariably equal to the five-year historical median spread between 

COFI and Federal COFI.

The purpose of the spread adjustment is to minimize or eliminate any value transfer for investors or 

borrowers that may result from a transition from COFI to a replacement index based on Federal COFI. 

The COFI spread adjustment methodology, which includes a one-year phase-in period for consumer 

products and an immediate transition for institutional products, is similar to that recommended by 

the Alternative Reference Rates Committee (“ARRC”) for consumer and institutional products in the 

LIBOR transition.6

Freddie Mac began publishing Ent 11th COFI Repl and Ent 11th COFI Inst Repl (collectively, the 

“Replacement Indices”)7containing the respective spread adjustments on its website on February 28, 

2022.

2.2 Spread adjustment methodology forthe Enterprise 11th District COFI 

Replacement Index

The spread adjustment for SF ARMs is based on the historical median of the differences between 

Federal COFI and COFI over a five-year lookback period spanning February 1, 2017 through January 

31, 2022. A one-year transition period is applied under this spread adjustment methodology for 

Single-Family loans indexed to COFI. This methodology is consistent with the ARRC announcement on 

spread adjustment methodology published in June 2020. The steps for calculating the spread 

5 Certain COFI-indexed ARM notes held by Fannie Mae specify a replacement index if COFI is no longer available; in those 

cases, the specified replacement index will be the fallback index specified in those notes rather than Ent 11th COFI Repl

6 ARRC spread adjustment methodology

7 The Enterprise 11th District COFI Replacement Index and the Enterprise 11th District COFI Institutional Replacement Index 

are not created, calculated, or published by or at the direction of, nor are the Enterprise 11th District COFI Replacement 

Index and the Enterprise 11th District COFI Institutional Replacement Index or is the decision that such indices are 

appropriate for use in any financial instrument in any way associated or affiliated with the Federal Home Loan Bank of San 

Francisco. The Replacement Indices may not be used on any new financial instrument created or entered into on or after 

February 28, 2022.
7

adjustment are noted below. For a specific example of how the spread adjustment and Ent 11th COFI 

Repl are calculated, please see Sections 4.1, “Appendix A: Example of the Enterprise 11th District COFI 

Replacement Index one-year transition period” and 4.2, “Appendix B: Spread adjustment scenarios.”

1. Determine Initial Spot Spread

As part of the spread adjustment methodology, an initial spot spread (“initial spread”) was 

calculated in early February 2022 (the “spread calculation date”, t1) as the spot difference 

between Federal COFI and COFI (each as published in January 2022):

Equation: Initial spreadt1 = Federal COFIt1 – COFIt1

Inputs: Federal COFIt1 = 0.736%; COFIt1 = 0.223%

Calculation: Initial spreadt1 = 0.513% = 0.736% - 0.223% 

2. Calculate the monthly linear adjustment (“monthly adjustment”) to the spread adjustment

The monthly adjustment to the spread adjustment is one-twelfth8 of the difference between the 

five-year median spread and the initial spread.

Equation: Monthly adjustment = 

1

12

* (Five-year median spread – Initial spreadt1)

Inputs: Five-year median spread = 0.729%; Initial spreadt1 = 0.513%

Calculation: Monthly adjustment = 0.018% = 

1

12

* (0.729% – 0.513%)

3. Calculate the replacement index at initial publication

On the initial publication date after the spread calculation datet1 (t2), Ent 11th COFI Repl is

calculated by subtracting the initial spread and the monthly linear adjustment from Federal COFI.

Equation: Ent 11th COFI Replt2 = Federal COFIt2 – Initial spreadt1 – Monthly adjustment

Inputs: Federal COFIt2 = 0.750%; Initial spreadt1 = 0.513%; Monthly adjustment = 0.018%

Calculation: Ent 11th COFI Replt2 = 0.219% = 0.750% - 0.513% - 0.018%

4. Continue spread adjustments in successive months

During the one-year transition period, the spread adjustment values for each month are linearly 

interpolated to reach the five-year median spread between Federal COFI and COFI by the end of 

the one-year transition period. The following illustrates each subsequent spread adjustment over 

the one-year transition period:

• Spread adjustment calculation one month after the initial publication datet2 (t3):

Ent 11th COFI Replt3 = Federal COFIt3 – Initial spreadt1 – 2*(Monthly adjustment)

• Spread adjustment calculation two months after the initial publication datet2 (t4):

Ent 11th COFI Replt4 = Federal COFIt4 – Initial spreadt1 – 3*(Monthly adjustment)

• Spread adjustment calculation eleven months after the initial publication datet2 (t13):

Ent 11th COFI Replt13 = Federal COFIt13 – Initial spreadt1 – 12*(Monthly adjustment)

8 We are using a 30/360 calculation for the monthly linear adjustment because COFI and Federal COFI are calculated and 

published monthly
8

• After the one-year transition period, the spread adjustment value is equal to the five-year 

median spread:

Ent 11th COFI Replt14 onward = Federal COFIt14 onward – Five-year median spread

Figure 2-1: Timeline for spread calculation of the Enterprise 11th District COFI Replacement Index

2.3 Spread adjustment methodology forthe Enterprise 11th District COFI 

Institutional Replacement Index

The spread adjustment for MF ARMs is based on the historical median of the differences between 

Federal COFI and COFI over a five-year lookback period spanning February 1, 2017 through January 

31, 2022. This methodology is consistent with the ARRC consultation on spread adjustment 

methodologies published in June 2020. The steps for calculating the spread adjustment are noted 

below. For a specific example of how the spread adjustment could affect future calculations of Ent 

11th COFI Inst Repl, please see Section 4.3, “Appendix C: Example of the Enterprise 11th District COFI 

Institutional Replacement Index.”

1. Calculate the spread adjustment

Calculate the spread adjustment based on the five-year historical median difference between 

Federal COFI and COFI with the five-year lookback period ending on the calculation date. The 

spread adjustment remains constant and there is no transition period.

Equation: Spread Adjustment = Five-year median spread

Inputs: Five-year median spread = 0.729%

Calculation: Spread Adjustment = 0.729%

2. Calculate the replacement index

Subtract the fixed spread adjustment from Federal COFI to arrive at Ent 11th COFI Inst Repl. The 

following calculation of Ent 11th COFI Inst Repl is for the first month of publication:

Equation: Ent 11th COFI Inst Repl t2 = Federal COFI t2 – Spread Adjustment

Inputs: Federal COFI t2 = 0.750%; Spread Adjustment = 0.729%

Calculation: Ent 11th COFI Inst Repl t2 = 0.021% = 0.750% – 0.729%
9

Figure 2-2: Timeline for spread calculation of the Enterprise 11th District COFI Institutional 

Replacement Index

2.4 Scenarios for COFI-indexed ARMs transition

The transition date of each legacy COFI-indexed ARM depends on the characteristics of the ARM, such 

as the next interest rate reset date and loan interest rate lookback period. If the date calculated by 

applying the loan interest rate lookback period occurs on or after February 28, 2022, COFI-indexed SF 

ARMs transition to Ent 11th COFI Repl and COFI-indexed MF ARMs transition to Ent 11th COFI Inst

Repl.

9

The scenarios included below provide the expected payments and interest rate reset mechanics for 

COFI-indexed ARMs with different characteristics. The scenarios are not intended to be exhaustive but

are intended to provide the reader with representative examples, such that they are able to anticipate 

changes to ARMs which do conform to the examples included below. The examples should be used as 

a guide to help readers understand when the interest rate and payment calculations of COFI-indexed 

ARMs switch to reference the Replacement Indices for the first time. The examples consider ARMs with

interest rate and payments resetting at the same time (Scenarios A and B) and cases in which the 

interest rate and payment reset frequencies differ (Scenarios C and D). 

❖ Scenario A: COFI-indexed ARM, with annual interestrate reset frequency, re-setting on April

1, 2022 and a 45-day loan interest rate lookback period

• Loan A is a 10-year seasoned ARM loan indexed to COFI, with an annual interest rate reset 

frequency and next interest rate reset date on April 1, 2022. Loan A has a 45-day loan interest 

rate lookback period. 

• Since COFI is still available forty-five days prior to the ARM’s interest rate reset date (i.e., 

February 15, 2022), the interest rate calculations (and the related payment calculation) use

COFI published on January 31, 2022.

• The respective Replacement Index is used on the subsequent annual interest rate reset date 

9 Certain COFI-indexed ARM notes held by Fannie Mae specify a replacement index if COFI is no longer available; in those 

cases, the specified replacement index will be the fallback rather than the Ent 11th COFI Repl.
10

on April 1, 2023 and each reset date thereafter to calculate interest and related payments.

Figure 2-3: Scenario A

❖ Scenario B: COFI-indexed ARM, with annual interest rate reset frequency, re-setting on April 

1, 2022 and a 15-day loan interest rate lookback period

• Loan B is a 10-year seasoned ARM loan indexed to COFI, with an annual interest rate reset 

frequency and next interest rate reset date on April 1, 2022. Loan B has a 15-day loan interest 

rate lookback period. 

• Since COFI is no longer published after the end of January and is not available fifteen days 

prior to the ARM’s interest rate reset date (i.e., March 17, 2022), the respective Replacement 

Index published on February 28, 2022 is used to calculate the new interest rate and the related 

new payment.

Figure 2-4: Scenario B

❖ Scenario C: Negative-amortizing

10 COFI-indexed ARM, with annual payment reset frequency 

on April 1, 2022, monthly interest rate reset frequency, a 1-day loan payment lookback period 

and a 45-day loan interest rate lookback period.

• In a negative-amortizing loan, the portion of the interest accrued each month that is not

covered by the monthly payment is added to the unpaid principal balance.

• Loan C is a 10-year seasoned negative-amortizing ARM loan indexed to COFI, with the 

following characteristics:

10 The GSEs no longer offer the negative-amortizing ARM product. However, there may be legacy negative-amortizing COFIindexed ARMs that remain outstanding at the time of the transition.
11

Loan Features Payment Interest rate

Reset frequency Annual Monthly

Next reset date April 1, 2022 March 1, 2022

Loan lookback period 1 day 45 days

• Since COFI is still available forty-five days prior to the ARM’s interest rate reset dates of March

1, 2022 and April 1, 2022 (i.e., January 15, 2022 and February 15, 2022, respectively), the 

interest rate calculations (and the related payment calculation) use COFI.

o The respective Replacement Index is used on the subsequent monthly interest rate 

date on May 1, 2022 and each reset date thereafter to calculate interest and related 

payments.

• COFI is not available one day prior to the ARM’s payment reset date on April 1, 2022 (i.e., March 

31, 2022), hence the respective Replacement Index is used to calculate the new payments.

Figure 2-5: Scenario C

❖ Scenario D: Negative-amortizing COFI-indexed ARM, with annual payment reset frequency on 

February 1, 2022 monthly interest rate reset frequency, a 1-day loan payment lookback 

period and a 45-day loan interest rate lookback period

• Loan D is a 10-year seasoned negative-amortizing ARM loan indexed to COFI, with the 

following characteristics:

Loan Features Payment Interest rate

Reset frequency Annual Monthly

Next reset date February 1, 2022 March 1, 2022

Loan lookback period 1 day 45 days

• Since COFI is still available forty-five days prior to the ARM’s interest rate reset dates of March 

1, 2022 and April 1, 2022 (i.e., January 15, 2022 and February 15, 2022, respectively), the 
12

interest rate calculations (and the related payment calculation) use COFI.

o The respective Replacement Index is used on the subsequent monthly interest rate 

date on May 1, 2022 and each reset date thereafter to calculate interest and the related 

payment.

• Since COFI is still available one day prior to the ARM’s payment reset date on February 1, 2022 

(i.e., January 31, 2022), the payment calculation uses the COFI rate. The payment remains the 

same (reference the same COFI rate) until it resets on the subsequent annual payment reset 

date (i.e., February 1, 2023).

• COFI is not available one day prior to the ARM’s subsequent payment reset date of February 1, 

2023, hence the respective Replacement Index is used to calculate the new payments.

Figure 2-6: Scenario D

2.5 Servicing SF and MF ARMs

As SF and MF ARMs indexed to COFI transition to the respective Replacement Indices, servicers must 

communicate with borrowers and update payment calculations.

❖ Key concepts

Servicers need to incorporate the Replacement Indices into calculations and reconciliations for 

borrower payments. The calculations need to be updated on an individual loan basis based on the 

terms of the ARM, which include:

• Payment adjustment frequency

• Rate adjustment frequency

• Loan payment lookback period

• Loan rate lookback period

• Next payment reset date

• Next interest rate reset date

As of February 28, 2022, new values of COFI are not available for the GSEs’ SF and MF ARMs and the 

appropriate Replacement Index must be used. Servicers and other relevant parties should have

considered and, if necessary, taken the actions listed in Figure 2-7 for their COFI-indexed SF and MF 

ARMs.
13

Figure 2-7: Actions to consider when servicing SF and MF ARMs

Focus areas Actions to consider

Borrower 

Communications

▪ Provide timely notice of the change in the index to borrowers consistent 

with loan documents, applicable law and regulations, including those 

governing payment change notices under Regulation Z for SF ARMs

▪ Retain a copy of the notice in the servicing file 

Document custodian

▪ For SF loans, send a copy of the borrower notice to the document 

custodian with an instruction to maintain the copy with the original SF 

COFI note

▪ For MF loans, maintain the borrower notice in the loan servicing file,

subject to review as requested

Legal documentation

▪ For SF loans, provide a copy of the note to the appropriate GSE if there are

any variations to the Uniform ARM note’s fallback index replacement 

language that was used just prior to recent revisions and request 

instructions on how to proceed

▪ For MF loans, provide a copy of the note to the appropriate GSE if the

fallback index replacement language is not to be determined at the 

discretion of the Note Holder and request instructions on how to proceed

Use of a new index in 

rate and payment 

calculations

▪ Update and test systems, reporting and other processes or activities 

related to interest rate adjustment calculations to incorporate the 

Replacement Indices' product parameters

▪ Adjust interest accrual calculations for changes in the underlying index 

Transfer of servicing ▪ Ensure that servicing transferees have the capability to service loans 

indexed to the Replacement Indices

❖ Helpful links

For more information on COFI transition impacts on servicing of COFI-indexed ARMs, refer to:

• Fannie Mae’s Single-Family Servicing Guide

• Fannie Mae’s Multifamily Selling and Servicing Guide

• Freddie Mac’s Seller/Servicer Guide
14

2.6 Administration of SF and MF MBS/PC

❖ MBS/PC features

The COFI transition impacts COFI-indexed ARMs pooled into MBS/PC. Unless terminated at or prior to 

the time of the COFI transition11, those outstanding MBS/PC also transition to the Replacement 

Indices.12 Freddie Mac MF no longer has MF PCs outstanding. Descriptions for index codes and Fannie 

Mae sub-types have been updated to reflect the transition to the Replacement Indices.

Investors and other relevant parties should have considered and, if necessary, taken the actions listed 

in Figure 2-8 for their SF and MF MBS/PC containing COFI-indexed ARMs.

Figure 2-8: Actions to consider when administering SF and MF MBS/PC

Focus areas Actions to consider

Investor awareness ▪ Maintain awareness of the updates to impacted pools

Use of a new index in 

rate and payment 

calculations

▪ Update and test systems, reporting and other processes or activities 

related to interest rate adjustment calculations to incorporate the 

Replacement Indices’ product parameters

❖ Helpful links

For more information on COFI transition impacts on administration of COFI-indexed MBS/PCs, refer 

to:

• Fannie Mae’s updated MBS Prospectus language

• Freddie Mac’s updated SF PC Offering Circular language

• Publication site of the Replacement Indices

11 See Section 1.2, “COFI transition timelines”

12 As mentioned previously, certain agreements held by Fannie Mae specify a replacement index if COFI is no longer available; 

in those cases, the specified replacement index will be the fallback rather than a replacement index published by Freddie 

Mac.
15

3. Collateralized Mortgage Obligations

3.1 Introduction

COFI-indexed CMOs are impacted by FHLB SF’s decision to cease publication of COFI after January 31, 

2022.

❖ Fannie Mae CMOs

All outstanding Fannie Mae COFI-indexed CMOs contain waterfall fallback language in the governing 

prospectuses identifying the fallback index for interest accruals as 1) the National Median Cost of 

Funds Index published by the Office of Thrift Supervision and then 2) LIBOR. Since the National 

Median Cost of Funds Index was discontinued in February 2012, the fallback index for all outstanding 

COFI-indexed CMOs is LIBOR.

13

❖ Freddie Mac CMOs

The fallback language in the Freddie Mac COFI-indexed CMOs indicates that, if FHLB SF fails to publish

COFI for a period of 65 days and does not publish or designate a replacement index, then Freddie Mac 

is required to select an index that performs in a manner substantially similar to COFI.

Freddie Mac has selected Ent 11th COFI Inst Repl as the replacement index for CMOs. Ent 11th COFI 

Inst Repl, which is comprised of Federal COFI plus a spread adjustment, transitions immediately to the 

five-year historical median spread between COFI and Federal COFI. Freddie Mac believes Ent 11th 

COFI Inst Repl is a comparable replacement rate for and successor to COFI for Freddie Mac CMOs.

Freddie Mac began publishing the Ent 11th COFI Inst Repl on its website on February 28, 2022. For a 

specific example of how the spread adjustment and Ent 11th COFI Inst Rep is calculated, please see 

Section 4.3, “Appendix C: Example of the Enterprise 11th District COFI Institutional Replacement 

Index.”

3.2 Administration

❖ Key concepts

Investors and trustees should maintain awareness of potential impacts of the COFI transition. 

Figure 3-1: Actions to consider when administering CMOs

Focus areas Actions to consider

Investor awareness ▪ Investors should maintain awareness of the updates to impacted CMOs

Use of a new index 

in rate and 

payment 

calculations

▪ Upon evaluation, update, and test systems, reporting and other processes 

or activities related to interest rate adjustment calculations to incorporate 

the Enterprise 11th District COFI Institutional Replacement Index as 

necessary

13 Since the anticipated index cessation date for one-year LIBOR is June 30, 2023, it is currently anticipated that these COFIindexed CMOs would switch from COFI to LIBOR after COFI is no longer published. Subsequently those CMOs would switch to 

a replacement index for LIBOR after June 30, 2023. In that event, we currently anticipate providing more information on the 

replacement index for LIBOR no later than December 31, 2022.
16

❖ Helpful links

For more information on the COFI transition impacts on administration of COFI-indexed CMOs, refer 

to:

• Fannie Mae’s Omnibus Supplement for certain LIBOR securities

• Fannie Mae/Freddie Mac LIBOR Transition Playbook

• Freddie Mac’s disclosure applicable to Freddie Mac-issued CMOs
17

4. Appendix

4.1 Appendix A: Example of the Enterprise 11th District COFI Replacement 

Index one-year transition period

Below is an example of how Ent 11th COFI Repl is calculated using finalized spread adjustments. This 

example is not indicative of future Federal COFI rates after the transition; rather, it serves as an 

illustrative example of the methodology that is used.

❖ Key dates

• First publication date: February 28, 2022

• Spread calculation date: February 2022

❖ Calculations

1. Equation: Initial spreadt1 = Federal COFIt1 – COFIt1

o Inputs: Federal COFIt1 = 0.736%; COFIt1 = 0.223%

o Calculation: Initial spreadt1 = 0.513% = 0.736% - 0.223%

2. The five-year median spreadt1 is equal to the median spot spread between Federal COFI and 

COFI during the last five years (publications dates ranging from February 2017 through

January 2022)

o Calculation: Five-year median spreadt1 = 0.729%

3. Equation: Monthly adjustment = 1

12

* (Five-year median spreadt1 – Initial spreadt1)

o Inputs: Five-year median spreadt1 = 0.729%; Initial spreadt1 = 0.513%

o Calculation: Monthly adjustment = 0.018% = 

1

12

* (0.729% – 0.513%)

4. Equation: Spread adjustmentt1 = Initial spreadt1 + n*(Monthly adjustment) where n is equal to

the number of months since January 31, 2022, but remains equal to 12 after January 31, 2023

o Inputs: Initial spreadt1 = 0.513%; Monthly adjustment = 0.018%

o Calculation: Spread adjustmentt1 = 0.531% = 0.513% + 1*(0.018%)

o Calculation: Spread adjustmentt2 = 0.549% = 0.513% + 2*(0.018%)

5. Equation: Ent 11th COFI Replt2 = Federal COFIt2 – Spread adjustmentt1

o Inputs: Federal COFIt2 = 0.750%; Spread adjustmentt1 = 0.531%

o Calculation: Ent 11th COFI Replt2 = 0.219% = 0.750% – 0.531%

For illustration purposes, we used the assumed monthly rates of Federal COFI (Column A) for March 

2022 onward and used the values above to show the calculation of Ent 11th COFI Repl at the time of 

the first publication date (in this case, February 28, 2022).
18

Figure 4-1: Example calculation of the Enterprise 11th District COFI Replacement Index

Publication Month Federal COFI14 Spread Adjustment Ent 11th COFI Repl

Feb 2022 0.750% 0.531% 0.219%

Mar 2022 0.914% 0.549% 0.365%

Apr 2022 0.892% 0.567% 0.325%

May 2022 0.827% 0.585% 0.242%

Jun 2022 0.912% 0.603% 0.309%

Jul 2022 0.951% 0.621% 0.330%

Aug 2022 0.985% 0.639% 0.346%

Sep 2022 0.889% 0.657% 0.232%

Oct 2022 0.918% 0.675% 0.243%

Nov 2022 0.925% 0.693% 0.232%

Dec 2022 0.896% 0.711% 0.185%

Jan 2023 0.903% 0.729% 0.174%

Feb 2023 0.912% 0.729% 0.183%

Mar 2023 0.946% 0.729% 0.217%

Apr 2023 0.904% 0.729% 0.175%

May 2023 0.892% 0.729% 0.163%

Jun 2023 0.898% 0.729% 0.169%

4.2 Appendix B: Spread adjustment scenarios

The following illustrates how the spread adjustment values will rise during the transition period 

because the initial spread adjustment is less than the five-year median spread (Figure 4-2).

14 Except for the publication month of February 2022, the values in this column are examples and are not indicative of future 

values of Federal COFI.
19

Figure 4-2: Initial spread adjustment is less than the five-year median spread

4.3 Appendix C: Example of the Enterprise 11th District COFI Institutional 

Replacement Index

Below is an example of Ent 11th COFI Inst Repl calculation. This example is not indicative of spread 

adjustment values, COFI rates, or Federal COFI rates after the transition; rather, it serves as an 

illustrative example of the methodology that is used.

❖ Key dates

• First publication date: February 28, 2022

• Spread calculation date: February 2022

❖ Calculations

1. The five-year median spreadt1 is equal to the median spot spread between Federal COFI and 

COFI as published during the last five years (February 2017 through January 2022)

o Calculation: Five-year median spreadt1 = 0.729%

2. Equation: Spread adjustment = Five-year median spreadt1

o Inputs: Five-year median spreadt1 = 0.729%

o Calculation: Spread adjustment = 0.729%

3. Equation: Ent 11th COFI Inst Replt2 = Federal COFIt2 – Spread adjustment

o Inputs: Federal COFIt2 = 0.750%; Spread adjustment = 0.729%

o Calculation: Ent 11th COFI Inst Replt2 = 0.021% = 0.750% - 0.729%

For illustration purposes, we used the assumed monthly rates of Federal COFI (Column A) and the 

values above to show the calculation of Ent 11th COFI Inst Repl at the time of the first publication date 

(in this case, February 28, 2022).
20

Figure 4-4: Example calculation of the Enterprise 11th District Enterprise COFI Replacement Index

Publication Month Federal COFI Spread Adjustment Ent 11th COFI Inst Repl

Feb 2022 0.750% 0.729% 0.021%

Mar 2022 0.914% 0.729% 0.185%

Apr 2022 0.892% 0.729% 0.163%

May 2022 0.827% 0.729% 0.098%

Jun 2022 0.912% 0.729% 0.183%

Jul 2022 0.951% 0.729% 0.222%

Aug 2022 0.985% 0.729% 0.256%

Sep 2022 0.889% 0.729% 0.160%

Oct 2022 0.918% 0.729% 0.189%

Nov 2022 0.925% 0.729% 0.196%

Dec 2022 0.896% 0.729% 0.167%

Jan 2023 0.903% 0.729% 0.174%

Feb 2023 0.912% 0.729% 0.183%

Mar 2023 0.946% 0.729% 0.217%

Apr 2023 0.904% 0.729% 0.175%

May 2023 0.892% 0.729% 0.163%

Jun 2023 0.898% 0.729% 0.169%
21

5. Summary of Prior Changes

October 2021

Section Summary of Changes

All sections ▪ Updated formatting throughout document

1. Overview ▪ Figure 1-1: Added October 20, 2021, milestone for the publication of COFI 

test data

2. Single-Family and 

Multifamily ARMs

▪ 2.1 Introduction: Updated language around the comparability of COFI and 

the Replacement Indices; updated language around spread adjustment 

methodology; added information about the publication of COFI test data 

by Freddie Mac; added a hyperlink to COFI test data

▪ Figure 2-7: Added Legal Documentation information for Multifamily

▪ 2.6 Administration of SF and MF MBS/PC: Specified differences in each 

GSE’s handling of COFI Replacement Indices; Added hyperlinks to Freddie 

Mac’s SF PC Offering Circular language and COFI test data

3. Collateralized 

Mortgage Obligations

▪ 3.1 Introduction: Updated language around the comparability of COFI and 

the Replacement Indices; added information about the publication of COFI 

test data by Freddie Mac; added a hyperlink to COFI test data

▪ 3.2 Administration: Added a hyperlink to Freddie Mac’s disclosure 

applicable to CMOs

February 2022

Section Summary of Changes

All sections

▪ Updated wording to reflect the completion of COFI transition milestones, 

including the final publication of COFI and the first publication of the 

indices chosen to replace COFI

▪ Clarified instances in which transition statements do not apply to nonstandard COFI notes held by Fannie Mae

▪ Updated formatting and abbreviations for consistency

2. Single-Family and 

Multifamily ARMs

▪ Added example calculations of the COFI Replacement Indices to the steps 

and equations

4. Appendix

▪ Replaced hypothetical values with actual values used in the calculation of 

the COFI Replacement Indices published at the end of February 2022

▪ Figures 4-1 and 4-2: revised example calculations based on the values of 

Federal COFI and COFI

▪ Removed spread adjustment scenario that will not occur