Conventional prepayment speeds slowed in September versus expectations of a small increase.  Consensus was looking for a 4% increase; however, speeds declined around 10%.  Factors influencing the September report and hence the bias towards slightly faster speeds were slightly lower average 30-year mortgage rates at 5.19% in August versus 5.22% in July, while the Refi Index averaged 6.4% higher on the month to 2056. Day count was unchanged from August at 21 days.

What was most surprising though was slowing in the premium coupons - particularly 6.5%s and 7%s.  Analysts had been expecting some influence from buyouts related to HAMP to begin to show based on trial modifications started on July 1.  This wasn't the case and is being attributed primarily to a timing issue regarding buyouts.  Barclays Capital, for example, pointed out that implementation of HAMP across servicers has varied dramatically. Chase has been the most aggressive, including in September, by a wide margin versus the other major servicers. They show speeds on FN 30-year 7s at over 35 CPR for Chase issues, with the others (WAMU, BoA, Citi, CW, Wells, and Others) at about 20 CPR or less.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.