The seasonally adjusted Refinancing Index increased significantly by 39.7% to 4983.7 from. 3567.6  the previous week, reported the Mortgage Bankers Association (MBA) this morning.

 

JPMorgan Securities said that this was on the low end of its expectations. This is why analysts predict that the Refinancing Index should be in the mid-5000s next week given that 30-year no-point mortgage rates are stabilizing near 5.375%.

 

Meanwhile, the seasonally adjusted Purchase Index increased to 452 .4, rising 5.6% from 428.6 the prior week. This was the second highest reading ever recorded. JPMorgan said that the ARM share of refinancing applications, by dollar volume, is still strong at 42.1%.The adjusted ARM Index

at its historical high of 6833.

 

Researchers said that fact that the combined factors of the percentage of ARM applications remaining high and the overall Refi Index surging implies that a large part of the refi applications is into ARMs.

 

In terms of prepayments, JPMorgan expects most of the pick-up in speeds to be in 30-year 5.5s for the April prepay report (reflecting activity in March). This is because they will probably reach a low 30% CPR level,

 

Analysts noted that MBA Refi Index was 10% higher in February compared to January and there are 3.5 more business days in March. These two factors suggests approximately a 28% pick-up in prepayments next month. JPMorgan projects that 30-year 5s will be up 15%, 5.5s up 40% to 45%, 6s up 25%, and 6.5s up 10-15%.

 

“There should be more prepayment convergence on 30-year 6s and 6.5s,” wrote analysts. They even predict them to prepay at similar levels to the May prepayment report (which reflects April speeds). The difference between 30- and 15-year speeds might hold steady or widen (as 30s refinance into ARMs at a greater rate). But considering the slower speeds in 15-year collateral, the percent acceleration may be the same or higher compared to 30-years.

 

 

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.