MTA (aka 12-MAT) is an index used to govern changes in certain Adjustable
Rate Mortgages (ARMs), notably Option and FlexPay-style ARMs which feature
monthly adjustment periods. MTA stands for "Moving Treasury Average".
The MTA, sometimes called MAT or 12-MAT, is a "derived" ARM index. It is
produced by adding together other published index values and dividing the
sum by the number of entries to produce a final single value.
To produce the monthly value for the MAT, a lender will add the last
twelve monthly values of the
one-year US Treasury Constant Maturity (not Treasury "bill") and divide
the total by 12 (entries). The result is the new index value.
To that value, the lender will add a markup, called a "margin", and the
sum of the two becomes your loan's new interest rate. For Option and FlexPay
ARMs, the margin is typically 250 basis points (2.5%). Different lenders may
use larger or smaller margins.
Since a "moving average" series could use any number of Treasury values,
some lenders identify the MTA as 12-MAT (their own shorthand for 12-month
moving average of the one-year Treasury).
Because it is a moving average, the MTA isn't as volatile as the index it
is derived from (see this chart for a graphic
demonstration). This can work to your advantage when interest rates are
rising, but when rates are falling, the moving average will prevent your
mortgage rate from falling rapidly.
Indexes comparable to the MTA include the
11th District Cost of Funds
(COFI) and COSI, the cost-of-savings index produced by Golden West Financial