Which of the following is not a recognized index used for an ARM loan?

The choice indicating that FHA is not a recognized index for an Adjustable Rate Mortgage (ARM) loan is correct because FHA refers to the Federal Housing Administration, which primarily provides mortgage insurance rather than serving as an index.

In the context of ARM loans, indexes are benchmarks used to determine interest rates on these variable-rate loans. Commonly recognized indices include COFI (Cost of Funds Index), LIBOR (London Interbank Offered Rate), and MTA (Monthly Treasury Average). These indices fluctuate based on market conditions and help lenders set periodic interest rate adjustments for ARM loans.

FHA does play a significant role in the mortgage market through its insurance programs, but it does not serve as an index for determining interest rates on ARM loans. This distinction is essential for understanding the structure and components of variable-rate mortgages.