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Model Performance
Prepayment Analysis
by Dan Szakallas
February prepayments rebounded from the unexpected lows seen in January with increases in the discounts and cuspy premiums. February increases were larger than we have seen historically, but that may be because the lows in January were much less than expected. FNMA 30-year prepayments for 5.0 to 5.5 coupons both showed about 10% increases from January’s speeds, while increases in the GNMA collateral were more moderate, in the 3% to 6% range. All collateral types across all coupons showed decreases from the previous month. We show actual pool CPR speeds of selected coupon buckets, along with corresponding model forecasts, in the table below.
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FNMA 15
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FNMA 30
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GNMA 15
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GNMA 30
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Coupon
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Actual
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Model
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Actual
|
Model
|
Actual
|
Model
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Actual
|
Model
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4.5 |
7.9 |
8.2 |
6.9 |
2.5 |
10.7 |
4.1 |
10.7 |
2.5 |
5.0 |
11.6 |
15.8 |
10.5 |
9.3 |
12.3 |
13.6 |
14.2 |
8.8 |
5.5 |
16.1 |
19.8 |
16.3 |
21.4 |
18.1 |
19.6 |
21.1 |
20.3 |
6.0 |
20.0 |
19.8 |
24.5 |
36.2 |
20.3 |
22.9 |
28.1 |
36.1 |
6.5 |
21.5 |
20.8 |
29.1 |
38.6 |
20.6 |
23.2 |
33.4 |
37.8 |
7.0 |
21.3 |
24.0 |
30.6 |
40.9 |
20.6 |
22.4 |
34.1 |
38.1 |
7.5 |
21.9 |
26.4 |
30.6 |
40.5 |
20.9 |
22.8 |
33.1 |
34.9 |
The Andrew Davidson & Co. Prepayment Model v4.3.3k was faster than the actual prepayment speeds for all collateral types listed above except for the GNMA 15 pools, where it was slightly slow by -0.2 CPR across coupons. Looking at the other collateral types, the model performed the best for FNMA 15-year pools, as it was off by a balance-weighted average of only 2.2 CPR. The FNMA 30-year model was fast overall by a balance-weighted average of 4.9 CPR across coupons. Lastly, the GNMA 30-year model came in at a balance-weighted average of 1.1 CPR, but was noticeably slow on the discount coupons. We will address this issue in the next release of version 4.3.
