Delaware Mortgage Loans

This is an index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a one-year maturity. The US Treasury determines the yields on these securities by using the “daily yield curve”. The daily yield curve is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. This index tends to be volatile and responds quickly to changes in economic conditions.

Summary:
This was the index of choice for years for banks and many ARMs still on the books are tied to this index. Because of its propensity to move quickly, the 1-year T-bill index has become less attractive for many mortgage originators and consumers as other alternative indexes have been introduced. Normally the CMT has a two percent interest rate change cap per year and a six percent lifetime cap, and the CMT has moved two percent in a year several times over the past twenty-five years.

Ideally Suited for:
This index is ideally suited for a very limited market at this time due to its volatility. It could possibly be used during a downtrend in interest rates ­ such as during an easing cycle by the Fed - as it will tend to fall more quickly than other indexes.