Wells Fargo officially replaced the Wachovia COSI (Cost of Savings Index) with a new Wells Fargo COSI. The initial rate is 2.40% and is reflective of the November 2009 COSI. See https://www.moneycafe.com/library/cosi.htm for more information, including charts and graphs.
This new index is based upon the interest rates paid by Wells Fargo’s banks on certificates of deposits held by individual depositors as of the last business day of each month. This index is specific to the Wells Fargo banking group and is a weighted average of the relevant deposits. The COSI is basically reflective of the rate Wells Fargo is currently paying to individuals for their CD’s, also known as personal time deposits. We anticipate Wells Fargo will report this rate a couple of weeks after the end of the previous month.
Prior to July 2007, this index was known as the World Savings COSI. From July 2007 to October 2009 it was known as the Wachovia COSI.
why just use the cds anf not the savings as this was the case with the original contracts with world savings?
Tom, this is a great question. I’m actually relatively sympathetic to not including savings accounts in the COSI index (although that statement is counter-intuitive) because World Savings had very little savings in their deposit base, it was heavily weighted towards CDs. Thus including savings in GDW-COSI had little practical effect.
Wells Fargo, on the other hand, is heavily weighted towards savings versus CDs. Wachovia was able to break the link of including savings when they developed their Wachovia COSI in 2007, and the regulator was asleep at the switch in letting them only use CDs. WFB is merely following the formula of Wachovia.
What I find “unusual” is how WFB’s COSI can compute to 2.4% when their CD base, according to their securities filings is $130 billion of CDs at a weighted average interest rate of 1.35%, and another $18 billion of CDs at a weighted average interest rate of 1.93% (page 18 from their Sept 30 10-Q — I don’t mean to upset you, but their savings accounts are $369 billion at a 0.34% rate).
This $148 billion basket of CDs (ignoring the savings) has a weighted average interest rate of 1.42% as of September 30th. Now rates didn’t go up in October/November — how did WFB COSI start at 2.4%??
Please recall that 1.42%, which is where I expected WFB COSI to start, is not that different from COFI and CODI, and is even higher than both rates (I believe 1.2% and 0.9% respectively).
So where did 2.40% come from? Strange.
The disturbing thing is that we used to be able to reconcile both GDW-COSI and Wachovia COSI to the respective securities filings of the financial institutions. At the moment, we can not reconcile WFB COSI, as a matter of fact, it’s not even close.
I hope that there is something temporarily unusual in the formula and that as the final Wachovia CD’s mature (all of which are very high rate) and are subsituted with CDs in the current environment that the index will moderate and be consistent with COFI and CODI.
So we are sitting tight for several months to see how WFB COSI performs to see if it begins to make sense. Perhaps after 3-6 more data points we will see if there is something rotten in Denmark, as Peter Sellers would say.
Good luck to all,
Greg
It’s very odd
Thanks Greg for all the reseach you are doing on this. I concur with everything you had to say.
I spoke with the VIP (haha) desk recently and got the same old tired story about how the old Wachovia CDs are still holding the average up.I fully understand the mathematics of this,but I believe it is all smoke and mirrors. If their very own SEC filings show a weighted average in the low one percent range then how on earth can they expect us to swallow a 2.4 percent index. If there is ANY kernel of truth in what they say then we should see significant drops in the next 6-8 months..We’ll see
I agree with the gal from a week or so ago. A class action suit needs to be generated to get these fat cats to show their hands. You can be certain as the economy recovers, rates will start to move, and this type of loan will go up quickly.
I too am frustrated. I really like my loan but have been disheartened with the index over the last two years. I am thinking of a refi but don’t want to miss out on a slide on the index. But I also think that rates will rise in the next two years. I’m betting we don’t go down too far from here.
Well another month and the index has dropped by an insignificant 0.05%. It would appear that even though the index should be in the mid one percent range, this downward trend may be coming to an end..I hope I am wrong,but don’t be shocked if WFB tries to inch the rate back up before too long.Let’s hope not
Mark, I agree completely — a 0.05% decrease is pretty underwhelming.
Wells Fargo should be publishing their year-end numbers soon, showing their cost of funds (and cost of CDs) and I’ll post those numbers here when they are available.
Good luck to all,
Greg
WFB COSI borrowers,
I found the Wells Fargo Q4 2009 press release (actually released last week). It didn’t do much to encourage me — recall that our COSI was 2.4% on December 15th, and 2.3% on January 15th (for each respective previous month-end).
Wells Fargo’s Q4 average interest-bearing deposits, per their press release, are as follows (page 22 of the press release)
Interest-bearing checking, $61.2 billion at average rate of 0.15%
Market-rate and other savings, $389.9 billion at 0.31%
Savings Certificates, $109.3 billion at 1.66%
Other Time Deposits, $16.5 billion at 2.28%
Short-term Debt, $32.8 billion at 0.18%
Long-term Debt, $210.7 billion at 2.31%
The average interest-rate paid for them on all of their interest-bearing liabilities is 0.99%.
Still a mystery on what constitutes the COSI basket of CD’s…..and very difficult to reconcile our 2.35% – 2.40% index to these line items.
Good luck to all,
Greg
WFB COSI borrowers,
At least we’re not the only ones that think there is something odd with the COSI index — please see the link below to the February 4th Wall Street Journal (I hope the link works….).
All the best,
Greg
http://online.wsj.com/article/SB10001424052748703575004575043670691505354.html
Thank you Greg for your contribution to the WSJ article. I think the COSI indext is a joke. I have had several 4 option pay loans from the old
World Savings and never had this index. Had i only known.
Great article in WSJ and great contributions Greg at least someone is interested in this… It amazes me that we cannot force WFB to give us, their customers, a full breakdown of exactly how the index is determined and we have to crunch their numbers that clearly don’t add up… I have previously faxed them asking for a breakdown and received no reply…
Well another month and another meager drop in the index…2.27. SLOWLY,SLOWLY it is moving closer to where we feel it should be. Lets hope it continues,and hold for a while.
I too am confused about WFBs calculation of the index.They list a pool of CDs and “other time deposits”. What exactly are these?
I think it would be useful if we started forwarding this WSJ article to our congressional representatives and ask for an investigation. I’m sending it to my congress woman, Ms. Pelosi.
Mr Tibbets after reading the WSJ article and seeing that someone in mass has commenced or already is suing..have you considered or are you in the process of starting legal action against anyone….i definitely think that something is wrong in denmark. it just doesnt smell right…but we seem to be in a hopeless situation…..i am in florida and would b party to any legal action if anyone would take our plight……thanks for your time…….serge
All,
Thank you for the kind comments. I remain hopeful that COSI will end up being a good index in the long run because WFB has such cheap CDs. I compared their rates last week to other competing banks and WFB was MUCH MUCH lower, which bodes well for the longer term. I think when the CODI jumps some day, WFB COSI will be extremely sluggish in moving up.
The real culprit was Wachovia in 2007, when they moved away from including depository accounts in the Wachovia COSI. We are still watching the continued roll-off of the Wachovia CD’s and expect to continue to see the slow downward movement of the WFB COSI.
I’m giving up my hopes of a 1.50% WFB COSI since COFI is 1.78%, but I sure would like to be below 2.00% for our COSI. I’d like to be there by June 30th, but only time will tell.
Good luck to all,
Greg
WFB COSI Borrowers,
Another tough day for us….COSI reset to 2.25% from 2.27%. Not what we were hoping for…..
Good luck to all,
Greg
TO THOSE INTERESTED IN A CLASS ACTION:
I have shopped the idea of a class action around to some attorneys who specialize in mass consumer fraud — so far, the reaction has been less then overwhelming because banking is highly regulated, and it appears Wachovia/Wells Fargo have complied with applicable regulations regarding the COSI. Nevertheless, I think all of us feel there was something hinky about what happened after Wells Fargo took over Wachovia and the COSI index remained so high for so long. I’m not sure if the WSJ article will spur some interest — but I definitely would support an investigation.
Hey Wells Fargo/Wachovia/World Savings executives that changed the COSI into the super secret, non-transparent, mortgage product that it is today.
Did you see what happened to Goldman Sachs, I hope that you are next to feel some pain. As to the regulators mentioned in the WSJ article, if you are reading this please share what you are regulating? Who are you, why aren’t these filings public?
Why Wells Fargo do you still not disclose how the COSi is weighted? You are the ones that changed the terms of the COSI index to your own self interest.
Once again, Wachovia posted the COSI on their website. Once again, 2.25%…odd it hasn’t changed for March, April or May??
Same COSI 3 months in a row-what are the odds?
Finally had enough and ditched this bogus, phoney cosi index and closed the refinance last month @ 4.25% / 15 years… if you can get out of this garbage do it, it’s a con
Hey, how’s that working out for you?
Cosi now at 0.85%…so I’m paying 2.25% on my mortgage.
Not garbage. Not a con. Best mortgage EVER for clear thinking, responsible borrowers.
Anybody excited about the settlement that wells fargo has signed with the states….and i was wondering if they are going to fix all pick a payment loans..or just the ones that are in arrears…any thoughts
Happy New Year COSI borrowers!
Let’s hope 2011 brings us some improvement (or at least transparency) from our “favorite” index.
We’ve continued to battle and inquire with Wells Fargo regarding the components of the index, which continues to defy all logic/securities filing data.
WFB continues to assure us that it is an honest index, and that there truly are a basket of CDs behind that mathematically compute to the index as reported. They remind us that the computation of the index has been reviewed and approved by their regulators.
The only explanation that might make sense is if there were some long duration CDs in the basket of CDs that are stabilizing the index, and that haven’t matured yet. I struggle with this explanation when I look at WFB’s securities filings, but that is the only thing that appears to make sense.
Our primary hope at this point is that when rates start to go up, the COSI is equally slow moving in going up as it has been coming down — but that’s going to be a painful lesson if it moves more quickly that it has dropped.
Best to all — I wish we had real information to work from.
Greg
The COSI Index has now risen .02 since November. No reason for concern but I hope this ISN’T a trend for 2011!!
The COSI has been drifting up. This does not pass the smell test. Is anyone still concerned? Has any progress been made in determining how the “weighted avg.” is calculated? Have any law suits been filed to determine this? Can an independent auditor audit Wells Fargo’s auditor? Like many of you, I have been told the info is proprietary. However, without oversight we all know what banks are capable of. A self determined internal index which magically levitates higher is just Well’s self dealing hocus- pocus. Why wouldn’t Wells want clarity for its cutomers? Perhaps because it wants to obfuscate its slight of hand. Is there anyone left out there willing to fight on.
July 18, 2012. Greg: My daughter obtained a pick and pay from WSB in ’05. She got the loan from a mortgage broker, a relative, (father in law), who was going to help her out. What a horror show. She has three kids 12, 8 and 4, and barelty enough to make end meet. Isn’t there anyone to go to?
I tried in vain, on several occasions to understand the “index” contained within the promissory note. Nothing but double speak, and no transparancy, what a joke.