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Model Performance
Prepayment Analysis
by Dan Szakallas
Prepayments dropped between March and April. This change was expected due to an increase in mortgage rates during the April refinance period. What was most surprising, however, was the drop in prepayments for the 4.5 coupon bucket. Driven primarily by turnover, we expected to see a small pickup in the area, but prepays actually fell by about 13%. The declines seen in FNMA 30-year 5.0s, 5.5s, and 6.0s were 22%, 25%, and 20% respectively, and were about what we expected last month given the rise in rates. FNMA 15-year prepayments also showed declines from March, as well as GNMA 15 and 30 year collateral. GNMA prepayments on discounts remained higher than FNMA prepayments, continuing a trend that has been seen over the last year. The largest drop in the GNMA 30-year coupons was seen in the 6.0 bucket, which dropped by about 17%. 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 |
9.7 |
8.8 |
8.0 |
3.4 |
12.1 |
10.2 |
13.2 |
10.1 |
5.0 |
12.9 |
15.1 |
11.6 |
8.7 |
14.4 |
17.0 |
15.4 |
16.6 |
5.5 |
16.4 |
20.0 |
16.9 |
20.4 |
18.6 |
21.9 |
20.8 |
28.0 |
6.0 |
21.6 |
21.4 |
25.8 |
31.4 |
20.5 |
23.1 |
27.2 |
34.6 |
6.5 |
24.2 |
22.4 |
31.7 |
32.3 |
23.4 |
23.2 |
33.3 |
34.9 |
7.0 |
23.5 |
25.3 |
34.0 |
32.4 |
22.5 |
23.0 |
34.4 |
36.6 |
7.5 |
25.0 |
27.7 |
33.8 |
33.2 |
20.7 |
24.7 |
34.1 |
37.1 |
