Prepayment speeds on all Fannie Mae and Freddie Mac MBS rose 6% and 8%, respectively, during November, but likely will slow soon in the months ahead, according to a new market report from Annaly Capital Management, New York.
According to the MBS investing REIT, Fannie securities carry a 27% 'constant prepayment rate' while Freddie products are a bit higher at 31%. (The speed increases are sequential in nature.)
Annaly said that while speeds rose in November, the expectation is for higher mortgage rates for the remainder of December and January. "Looking ahead, speeds in the near term should be tame relative to rates, especially higher coupons, with January's release estimated to be slow on weak seasonality, day count and mortgage originator capacity constraints."
The company is forecasting continued demand for MBS, but said the "key themes" for next year include "delinquencies, low supply on weak credit and tighter underwriting standards."