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Model Performance
Prepayment Analysis
by Dan Szakallas
Prepayments posted notable increases from May to June, as rates fell steadily during the refinance period over the previous couple of months. The seasonal increase in housing turnover also helped prepayments increase by about 17% across coupons for FNMA 30-years, and by about 11% for GNMA 30-years. The biggest percentage increases were seen in (surprisingly) FNMA 30-year 4.5s, which jumped by 28% to 10.7 CPR and the GNMA 30-year 4.5s, which rose by 22% to a very high 18.1 CPR. It is extremely surprising that GNMA 30-year 4.5s prepaid at a higher rate than FNMA 30-year 5.0s, 18.1 CPR to 15.2 CPR, respectively. Looking at the higher premiums, we see very little change from the previous month, with the largest increase being 6.6% in the FNMA 30-year 6.5s. Actual pool CPR speeds of selected coupon buckets, along with corresponding model forecasts, are shown in the table below.
FNMA 15 |
FNMA 30 |
GNMA 15 |
GNMA 30 |
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Coupon |
Actual |
Model |
Actual |
Model |
Actual |
Model |
Actual |
Model |
4.5 |
12.0 |
10.8 |
10.7 |
4.4 |
15.7 |
10.2 |
18.1 |
11.5 |
5.0 |
15.3 |
16.7 |
15.2 |
9.4 |
19.0 |
16.6 |
20.3 |
17.8 |
5.5 |
18.7 |
21.6 |
21.8 |
21.4 |
20.3 |
21.7 |
26.4 |
28.3 |
6.0 |
22.3 |
23.8 |
30.1 |
31.7 |
21.1 |
22.2 |
32.5 |
35.0 |
6.5 |
23.6 |
24.9 |
34.0 |
32.6 |
23.0 |
22.6 |
36.5 |
33.0 |
7.0 |
23.2 |
27.5 |
35.1 |
33.0 |
22.7 |
22.8 |
35.8 |
33.2 |
7.5 |
24.3 |
29.9 |
34.5 |
34.5 |
22.3 |
24.7 |
34.7 |
34.3 |
