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.”

UMBS Speeds by Vintage Year

FGLMC Speeds by Vintage Year

GNMA Speeds by Vintage Year

Kevin A. Smith, CFA

SVP, Director Investment Product Strategies

Vining Sparks

Adam Hofer

Analyst, Investment Product Strategies

Vining Sparks

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