SOFR is published daily by the New York Federal Reserve and reflects the cost of borrowing cash overnight collateralized by US Treasury securities. It's considered more reliable and harder to manipulate than LIBOR.

Most ARMs originated after 2021 use a 30-day average SOFR plus a margin (typically 2-3%) to determine the new rate at each adjustment.

SOFR moves with broader interest rates — when the Fed raises rates, SOFR rises with them; when the Fed cuts, SOFR falls.