How adjustable-rate mortgages really move
What your rate follows
In brief
An index is a published benchmark rate your ARM follows. Most new US ARMs use SOFR, the Secured Overnight Financing Rate, which the Federal Reserve Bank of New York publishes based on actual overnight lending backed by Treasury securities. It replaced LIBOR, which was phased out because it relied on bank estimates rather than transactions.
Last reviewed against the primary sources listed below.
SOFR in one paragraph
SOFR measures the cost of borrowing cash overnight using Treasury securities as collateral. ARMs usually use an average of SOFR over a period. The New York Fed publishes it daily.
Finding your index
Your note and disclosure name the exact index and the date used for each adjustment. The CFPB explains.
ARM questions
What does SOFR stand for?
Secured Overnight Financing Rate, published by the Federal Reserve Bank of New York.
Is SOFR the same as LIBOR?
No. SOFR is based on actual secured transactions; LIBOR was based on bank submissions and has been discontinued.
Why is LIBOR no longer used?
Regulators phased it out because it relied on estimates and was vulnerable to manipulation; SOFR replaced it for most US products.