Prepay Commentary

September MBS Prepayment Speeds

September factors are out and, overall, prepayments increased again but there is some nuance this month. First, while speeds increased overall; they did not increase nearly as much as last month. Also, unlike last month, lower coupons saw declines from the previous month; more than likely a sign of lower seasonal factors. Again, it is likely to see prepayment speeds increase again next month as mortgage rates have held and continued to fall. However, there will be competing interest as declining seasonal factors should offset increases in rate/term refinancings.

Notables and Thoughts

Based on the Freddie Mac Primary Mortgage Market Survey, 30- and 15- year fixed-rate mortgage rates are at their lowest levels since 2016. This year alone, 30- and 15-year mortgage rates are down 102 and 99 bps, respectively.

U.S. Department of the Treasury: Housing Reform Plan

“This plan addresses this last unfinished business of the financial crisis in a way that preserves what works in the current system, protects taxpayers, and reduces the influence of the Federal Government in the housing finance system.”

WSJ: How Fannie and Freddie Have Changed Since the Crisis

“Today, Fannie and Freddie look a lot like the mortgage market at large. Many of the mortgages they buy are made by nonbanks, which are less regulated than their bank counterparts.”

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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