FNMA 30-year fixed rate prepayments were in line with expectations for March, increasing over 60% as Fannie Mae began buying out 120 day or more delinquent loans, starting with higher coupons. Speeds on FNCL 6.5s and 7s surged over 200% compared with around a 30% increase for lower coupons.
The increase in speeds in lower coupons was largely a result of the higher day count: 23 versus 19 in February.
Similar to the February Freddie Mac report, loan balance paper had lower delinquencies, noted Barclays Capital analysts. This further strengthens the case that this sector, "should continue to provide call protection from both a refinancing and buyout perspective," analysts said.
Overall, FNMA MBS prepaid at 27.7 CPR, up nearly 86% from February's weighted average of 14.9. Paydowns totaled $71.5 billion with net issuance of negative $37.5 billion.
Meanwhile, FHLMC Gold speeds plunged 50% in March following Freddie Mac's buyout purge in February.
Several analysts pointed out that the GSE's report offered a picture into the new prepayment landscape.
Specifically, Credit Suisse analysts said that, "higher roll rates as manifested through FHLMC March prints should pressure higher coupon valuations as investors digest the reality of speeds roughly 50% faster than the run rate in 2009."
For March, FHLMC Gold MBS prepaid at 18.2, a 55% drop from February. Paydowns amounted to $30.6 billion with net issuance also negative at negative $738 million.
GNMA speeds were projected to increase close to 20%. However, prepayments were essentially flat as speeds slowed on 5.5s through 7s as servicer buyouts remain muted.
BNP Paribas analysts noted in a recent emailed report that GMAC was on the cusp of the 5% issuer limit on 90+ day delinquencies and so could experience buyouts "perhaps as soon as next month."
Some uncertainty with Taylor, Bean & Whitaker (TBW) buyout potential 90+ delinquencies are substantially above the GNMA threshold, BNP analysts said. However, when combined with Bank of America (BofA), which is managing the TBW loans, delinquencies are actually below 5%, they said. The uncertainty therefore is whether GNMA considers TBW pools separate from BofA or not.
Overall, GNMA MBS prepaid at 13.3 CPR, down 1.5 CPR from February. Paydowns were $11.1 billion with net issuance a positive $9.5 billion.
In the April prepayment report, speeds on 30-year FNMAs are expected to increase over 30% with 5s and 5.5s holding unchanged, while 6s are seen increasing 150% as delinquency buyouts are concentrated in this coupon.
Meanwhile, speeds on 30-year FHLMC Golds and GNMAs are expected to slow around 5% as a result of a slightly lower day count and refinancing activity.
The number of collection days slips 1/2 day to 22.5, while the Mortgage Bankers Association' s Refinance Index was about 4% lower on average in March versus February. Updated outlooks will be out in the next week or so.
