Finance
An Oregon buyer is financing a home with an adjustable-rate mortgage (ARM). Which of the following is the 'index' most commonly used to determine rate adjustments on ARMs?
AThe Federal Reserve discount rate
BSOFR (Secured Overnight Financing Rate) or similar benchmark index✓ Correct
CThe Oregon state prime rate
DThe national median home price change
Explanation
ARM interest rates are tied to a financial index, such as SOFR (which replaced LIBOR), the U.S. Treasury rate, or COFI. The lender adds a 'margin' to the index to determine the fully indexed rate. When the index rises or falls, the borrower's rate adjusts accordingly at each adjustment period.
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