March prepayments were generally not in line with expectations. Speeds on FNMA 2006 and 2007 vintages declined 19% and 16%, respectively, on average. This is compared with expectations of negative 5% and negative 10%. Prepayments on older vintage 5.5s through 7s increased, particularly for 6.5% and 7% coupons. Speeds for this group were expected to slow around 3%.

The factors that contributed to the slowing in prepays were higher mortgage rates in February (compared with January) that led to slower refinancing activity. In addition, February speeds were also impacted by the rush to close before higher g-fees went into effect on March 1, particularly in the less seasoned 2007 and 2006 vintages.

Freddie Mac’s report also showed strong slowing in the 2007 and 2006 vintages, negative 17% and negative 10%. However, older vintage 5.5s and higher recorded much higher percentage increases versus FNMAs.

GNMA's performance was similar to FNMA's. Speeds were projected to slow nearly 6% on 2007 vintages, on average, by negative 10% in 2006s, and to be about flat on older vintages. Speeds slowed 21% on average for 2007s, negative 6% for 2006s and rose 11% for older vintages.

Overall, MBS speeds were 1% to 2% CPR slower on aggregate according to The Web site reported FNMAs at 14.3% CPR in March versus 16.0 in February, FHLMC Golds at 14.8 CPR versus 15.2, and GNMAs at 16.0 versus 17.4. Total agency issuance was $97.3 billion in March, down from $116.7 billion in February; paydowns amounted to just under $61 billion, up from $58 billion in February.

Looking to April, expectations have been for slowing of 6-8%. Mortgage rates did average slightly higher in March versus February at 5.97% and 5.92%, respectively, while refinancing activity was 13% lower on average. This has offset the higher day count — 22 days in April from 20 days in March — and improving seasonals.



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