December 2020 MBS Prepayment Speeds
December factors were released Friday evening (reflecting activity in November), and prepayment speeds are now available. For the first time in many months, I can report that prepay speeds broadly declined. They do remain elevated though and this respite is potentially short lived. The decline is likely due to fewer business days and a dash of seasonality.
Looking forward, it is likely prepay speeds remain elevated. Seasonal factors in December could keep prepays muted (relatively speaking) next month. That being said, mortgage rates have continued to fall even as Treasurys are higher as the Primary/Secondary spread continues to move lower. For example, mortgage rates for the relevant January and February of 2021 refinance window are respectively 7 and 16 bps lower than they were for this month’s window. As always, time will tell. I appreciate everyone’s readership this year and if there is anything I can do for you between now and the end of the year, please don’t hesitate to reach out.
Existing Home Inventory Remains Weak – Meanwhile, Ownership Remains Elevated
Speeds Remain Elevated – Broadly Lower
Prepay Friction – 30-Year 3.0s of 2019
Prepay Friction – 15-Year 3.0s of 2019
GNMA – Non-Jumbo to Jumbo Comparison
Primary/Secondary Spread – Decline Continues
Mortgage Rates – New All Time Lows on 15- and 30-Year Mortgage Rates
What We’re Reading
“The federal government helped millions of Americans through the early months of the pandemic by allowing them to defer payments, with little negative effect, on mortgages and student loans, two markets in which it holds huge sway. But the government’s reach doesn’t extend to credit-card lending, auto loans or personal loans, and borrowers with those forms of debt ended up with much less relief.”
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Analyst, Investment Product Strategies