The 30-year FNMA prepayments were close to overall expectations of around a 3% slowing in speeds.

However, it came about on a much larger than expected decline on 4.5% and lower coupons, while 5.5s and higher were faster than expected.

Specifically, speeds on 2008 and 2007 6.0s jumped 11% to 34 and 32 CPR and similar vintage 6.5s rose close to 10% from ~25 CPR to 30 and 27, respectively. Dwarfs also showed a similar trend, as did 30-year FGLMC.

The influences on the lower coupons were primarily related to a lower number of collection days at 20 versus 22 in March as well as a decline in refinancing activity that began in mid-February as mortgage rates moved off their record lows.

The 10-basis-point increase in the g-fee on April 1 also factored into the larger-than-expected slowing down in coupon as servicers rushed closings in February and March to avoid this.

Meanwhile, higher coupons were impacted by refinancing activity associated with HARP 2.0. As pointed out by Barclays Capital analysts, JPMorgan Chase, Citi and Wells Fargo remained the most active participants, while Bank of America (BofA) activity remained limited.

Analyss also noted that BofA speeds provide a barometer of cross-servicer refinancing activity and based on this report "cross-servicer refinances under HARP 2.0 has yet to result in a material increase in realized speeds." This is not particularly surprising since even with the changes made to the program, hurdles remain for cross-servicers.

GNMA I speeds did not slow as much as expected with speeds on 4.5s and 5.0s in line with expectations, while 5.5s and higher did not decline as much as anticipated.

BofA is the primary instigator of this as the bank continued with their delinquency buyouts, particularly focused in 5.5%s. Credit Suisse analysts estimated that BofA bought out only about 10% of the delinquent balance in this coupon.

They added, as did other analysts, that the trend of BofA's buyouts implies balance sheet issues that suggest a continuation of small-scale buyouts in the coming months to remain under the 5% cap. This indicates further delinquency buyout risks in May for 5.5%s and possibly, to a smaller extent, in 5.0s which is showing in GNMA/FNMA 5.5 and 5.0 swaps which are lower.

Overall, eMBS reported speeds on FNMA and FGLMC MBS fell 2.4% and 2.1% respectively to 22.6 and 24.8 CPR, while GNMAs slid 1.2% to 18.5. Gross issuance totaled $104 billion, while paydowns were nearly $114 billion which resulted in net issuance of -$9.5 billion.

Looking ahead, the 30-year conventional speeds have on average been projected to be slightly higher in May with higher coupons increasing more than lower ones. The number of collection days is higher by two days to 22, while refinancing activity in April was 1.6% higher on average than March as a rsult of a decline in mortgage rates to a 3.91% average from 3.97%.

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