Prepayments slowed more than projected in April as a result of higher credit fees and a lower number of collection days. 

Over March and April, the GSEs increased loan-level price adjustment fees, while Federal Housing Administration mortgage insurance premium increases went into effect mid-April. Meanwhile, the day count fell to 20 from 23 in March.

The 30-year FNMAs declined 12% versus an expected 7% slowing, FHLMC Golds were down 11% versus a predicted 2% drop, and GNMAs slowed 12% versus a projected 2%. 

The declines were relatively uniform across the coupon stack. Notably FHLMC Gold speeds remained slightly below FNMA speeds, which should benefit FHLMC Gold/FNMAs. Bank of America Merrill Lynch analysts also noted that Chase-serviced FNMA pools continued to prepay extremely fast relative to other servicers and relative to Chase-serviced Freddie pools.

Overall, eMBS reported speeds on FNMA MBS declined 13% to 13.2 CPR in April, FHLMC Golds 10% to 12.9 CPR, and GNMAs 12% to 9 CPR.  Gross issuance totaled $68.1 billion; paydowns amounted to $64.2 billion, leaving net issuance at $4 billion.

Net issuance dropped substantially from the $22 billion per month average seen in the 1Q11. In a mid-April report, Citigroup Global Markets MBS analysts said they expected net supply to decline in the second quarter "as cross-over and portfolio refinances to agency MBS should decline with higher mortgage rates."  This is supported by the recent Senior Loan Officers Opinion Survey, which reported further tightening and weaker demand in general for prime and non-traditional residential mortgage loans. 
At this time, speeds in May are expected at around 2% higher on conventionals and 2% slower on GNMAs on average. Factors influencing the report are a higher day count of 21 days, while the Mortgage Bankers Association's Refinance Index declined over 14% on average in April from March as mortgage rates were unchanged at a 4.84% average.

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