The Monthly Treasury Average, also known as 12-Month Moving Average Treasury index (MAT) is a relatively new ARM index. This index is the 12 month average of the monthly average yields of U.S. Treasury securities adjusted to a constant maturity of one year. It is calculated by averaging the previous 12 monthly values of the 1-Year CMT. Because this index is an annual average, it is more steady than the 1-Year CMT index. The MTA and CODI indexes generally fluctuates slightly more than the 11th District COFI, although its movements track each other very closely.

If you want a stable adjustable rate mortgage that does not jump quickly then the MTA is the index for you.

The MTA index is frequently used on Option ARM loan products. These products allow for a minimum monthly payment that is less than the total amount of interest due. If the borrower chooses to make only the minimum payment, the excess interest will be deferred back on to the principal balance.

The MTA Pay-option ARM loan is used in many instances to either increase cash flow for investors because of the low monthly payment options or allow a home owner to purcahse a more expensive home until more cash is available.

History has shown that the MTA-indexed mortgage offers a lower fully-indexed Rate (which is Index + Margin) vs. the COFI,cosi and CODI's fully indexed Rate over the preceding 15 years

The MTA index is best used in an increasing market. The 12-MTA Index does not move up or down as quickly as other market interest rates because the 12-MTA is an average of annual yields on U.S. Treasury Securities over a 12 month period.

The MTA is considered a good choice for home investment, since interest rate increases, take longer to affect the 12 month MTA than other indices.

The 12-Month Treasury Average Index (12-MTA) is based on the average annual yields on U.S. Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve. The 12 months average is determined by adding together the annual yields for the most recently available 12 months and dividing by 12.

Stability: The 12-MTA Advantage
The 12-MTA Index does not move up or down as rapidly as other market interest rates because the 12-MTA is an average of annual yields on U.S. Treasury Securities over a 12 month period.

As a result:
-Higher yields are offset by lower yields on a monthly basis throughout the year
-It creates an index which is far less volatile than other pure-rate indices
-Interest rate increases take longer to affect the 12-MTA than other ARM indices

Historically, home loans tied to the 12-MTA have not exhibited sharp
interest rate increases such as those that occurred in the late 1980s. Unlike more volatile indices, the 12-MTA has never increased more than .29% in any month for over a decade.