MTA Index Refinance

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MTA Index Refinance
MTA stands for Monthly Treasury Average, and is also know as the MAT or 12 MAT. The MTA or MAT index is a relatively slow moving ARM index based on the 12 month average of the monthly average yields of United States Treasuries, which are securities sold by the US government to finance national spending and are backed by the full faith of the US government.

As an ARM Index, the MTA or 12 MAT index has become increasingly popular in recent years, thanks in large part to the popularity of the Option ARM mortgage for which it serves as one of the most common indexes.

Adjustable Rate Mortgages based on the MTA index are commonly called 1-Month MTA, 3-Month MTA, 12-month MTA, Pay Option ARM, and Pick a Pay Mortgage. While the MTA index itself is more stable than other common ARM indexes such as the CMT index on which it is based, many of the ARM mortgages based on the MTA have rates which adjust each month, even if you dont know it. This presents significant risks to the homeowner who does not understand these mortgages, which can be mitigated by fixing the rate on an MTA ARM by refinancing. Conventional fixed rate mortgages do not have minimum payment options, so many borrowers in MTA-based mortgages do not refinance to convert to a fixed rate because they do not want to make a large monthly payment. However, there are now options for borrowers in MTA index ARM loans to refinance into a fixed rate without sacrificing the minimum payment options. If you are currently in an MTA index-based ARM, and like the low payment caps, you may be eligible to refinance into a fixed rate mortgage (fixed for 3 to 30 years) while still preserving the flexibility of the "minimum payment" deferred interest option for which these loans are best known. These programs are not widely available, and are only offered to qualified borrowers. For more information on Refinancing your MTA Index Adjustable Rate Mortgage to a Fixed Rate Mortgage with similar payment options, call us at 888-418-4467 or request information by email (include your state, the value of your home, and the balance of your mortgages in your message) at info@themortgageu.com

MTA Index is usually less volatile than the other indexes used to calculate ARM loans. The banks calculate monthly interest rates by adding the index value to what is called a margin. The margin is a fixed rate that is agreed upon at closing of the loan. A borrowers interest rate will never be lower than the margin.

A MTA index is the underlying index that determines the change in rate for an adjustable rate mortgage (ARM).

Ask your mortgage professional to supply you with a history of the MTA index. This will give you an idea of how stable an index it is.

MTA adjustable home mortgage loans use the 12-Month Treasury Average Index. The 12-MTA is based on average annual yields on U.S. Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve. Historically, MTA adjustable home mortgage loans have not exhibited sharp interest rate increases such as those that occurred in the late 1980s. Additionally, unlike more volatile indices, the 12-MTA has never increased more than .25% in any month for over a decade.

The majority of MTA indexed mortgages are Option ARMs. Most of these option ARM mortgages use the 1 month MTA index, and their rates adjust monthly, although you wouldn't know it because option arm loans have payment caps which keep the minimum payment fixed even though the underlying rate may change. This monthly adjustment with an annual payment cap is really the riskiest part of being in an option ARM, because you may be deferring substantially more interest than you realize. For borrowers in option ARM mortgages, look into a fixed rate pay option product, or fixed option arm, which provides you with more predictable results over a longer period of time.

Remember that the MTA takes the averages of the last 12 months. So even after the Fed has stopped raising rates the MTA will continue to rise. Conversely, if the Fed is in a lowering mood then the MTA will go down at a slower rate as well. Like all ARM's there are advantages and disadvantages to each index.

MTA Index Adjustable Rate Mortgages, including those with multiple payment, cash flow and positive or negative amortization options, are very common in the super jumbo mortgage category (Note: Super Jumbo mortgage is a name given to mortgages from $650,000 up to several million dollars or more).

Indexes which closely track the MTA index, and vice versa, include the COFI or Cost of Funds Index and the COSI or Cost of Savings Index.

All the above make the MTA index a very stable index for those seeking Option ARMs and are well disciplined with their finances.

 

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