The CODI has not been published for over two months and it doesn’t seem like it’s coming back. This Certificates of Deposit Index (or CODI) was commonly used in the past as an index for adjustable mortgage loans. The CODI is the 12 month average of the monthly average yields of 3 month certificates of deposit. In plain English, this index is calculated by averaging the previous 12 monthly rates of the 3 month CD rate, which was published monthly by the Federal Reserve.
But since July 1, 2013 the Federal Reserve has not provided data to calculate the CODI. The Federal Reserve says it doesn’t publish CD survey data “when the number of respondents is too few to be representative.” So apparently they are not getting enough information from banks and dealers. When we contacted the Federal Reserve this week to see when they will start publishing CD rates again, a Senior Financial Analyst said it was “unknown at this time when CD rates will be available again.”
So why does this matter? Well, there are many loans still outstanding that are tied to the CODI. If the CODI is no longer available, lenders will substitute or re-calculate an index. And we know from experience that doesn’t work out well for borrowers, as evidenced by the COSI (Cost of Savings Index) debacle that is still ongoing years later. In the COSI situation, borrowers have paid millions more in interest than they would have with other indexes.
We will keep watch on the situation as it unfolds. Please contact us or comment if anyone has more information.
For CODI Rate history see: https://www.moneycafe.com/personal-finance/codi-rate-certificates-of-deposit-index/