Prepay Commentary |  |
November 2020 MBS Prepayment Speeds
November factors were released yesterday evening (reflecting activity in October), and prepayment speeds are now available. At the risk of sounding like a broken record, prepay speeds remained elevated. At a high-level, conventional speeds increased 2-4 CPR while GNMA saw non-jumbo collateral increase 1-2 CPR and jumbo collateral increase 4-5 CPR.
Looking forward, it is likely prepay speeds remain elevated. Mortgage rates have continued to fall even as Treasurys are higher as the Primary/Secondary spread moves lower. Housing activity remains resilient as months supply is, the best I can tell, at an all time low of 2.7 months dating back to 1999. The homeownership rate has ticked down slightly; however, remains at levels not seen since 2009 when they were on a downward trend.
Existing Home Inventory Remains Weak – Meanwhile, Ownership Remains High
Speeds Remain Elevated, Lower Coupons Continue to March Higher
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 – Remains Elevated, 30 bps decline from August High
Mortgage Rates – At All Time Lows on 15- and 30-Year Mortgage Rates
What We’re Reading
WSJ: Mortgage IPO Boom Faces Market Turbulence
“At least six of the 30 largest U.S. mortgage lenders have gone public this year or are seeking to, according to industry-research group Inside Mortgage Finance.”
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies
Vining Sparks
Adam Hofer
Analyst, Investment Product Strategies
Vining Sparks