Prepay Commentary

April Prepayment Speeds

May 5, 2017

MBS prepayment speeds slowed, reversing direction from the previous month’s increase that was caused by a combination of technical and seasonal factors. The April slowdown was the seventh decline in prepayment speeds in the last eight months. With the exception of a couple of very low and high coupons, speeds were lower all across the coupon stack. However, in aggregate, the slowdown for FNMA, FHLMC, and GNMA was only in the 1 CPR range. Market expectations were in line with these estimates, resulting in no surprises for investors and also for the markets.

Mortgage rates averaged 3.90% for the month of April, after reaching a year-to-date low of 3.81% on the 19th, according to Thirty-year mortgage rates and the ten-year US Treasury have followed similar paths since the Election: they recorded year-to-date highs of 4.19% and 2.63% on March 14th and 13th, respectively, and year-to-date lows of 3.81% and 2.17% on April 19th and 18th, respectively. The MBA Refi Index has remained rangebound since the beginning of the year, with a high of 1413.30 and low of 1182.30. Refinancing activity has been stagnant the last several months, and the MBA Index shows no signs of a pickup in refinance applications as burnout of existing applicants has prevailed. The number of collection days will be three greater in May, likely leading to a small increase in prepayment rates from April. While prepays should increase MoM, such an increase does not indicate a significant change in refinancing trends or revival in the housing market as technicals are very still very weak and activity shows few signs of rebounding from its current levels.










FNMA Speeds by Vintage Year

FHLMC Speeds by Vintage Year

GNMA Speeds by Vintage Year

Non-Generic Collateral Comparison Tables



James Plunkett

Director of Investment Product Strategies

Vining Sparks

Amanda Noa

Vining Sparks

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2022
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120