Prepay Commentary |  |
April MBS Prepayment Speeds
May 7, 2018
April MBS prepayments fell slightly versus the prior month, a surprise for many market watchers and participants, most of whom predicted a slight increase for the month. Thirty-year and fifteen-year FNMA MBS slowed 3% and 1%, while FHLMC MBS remained unchanged to slightly higher, +2%, respectively. GNMA I MBS dropped -6% for thirty years while remaining almost unchanged for fifteen years. GNMA II MBS posted decreases of 5% and 3% for thirty and fifteen years, respectively.
For the pertinent application period, mortgage rates held steady around 4.25% for thirty-year rates and 3.5-3.75% for fifteen-year rates, levels not seen since 2014. The MBA Refi Index illustrates the lack of borrowers who have not already had a chance to refinance before the steady climb in interest rates began in 2016. This Index hit a 9.5-year low the week ending April 27th at 1104.90. In addition to higher mortgage rates, a still relatively weak housing market will continue to keep the MBA Refi Index low and range-bound for the foreseeable future.
Next month, May MBS prepayment speeds should post a CPR increase month-over-month. With a higher day count and better seasonal factors, increases of around 5% to 10% seem likely.
Non-Generic Collateral Comparison Tables
James Plunkett
Director of Investment Product Strategies
Vining Sparks
Amanda Noa
Vining Sparks