Model Performance - April '06

Prepayment Analysis
by Dan Szakallas

Prepayments rose noticeably in March, as seasonal home sales and increased business days drove prepayments higher across the board. Given the 4 additional business days in March compared to February and the yearly trend of home sales increasing in March, prepayments on FNMA 30-year discounts rose over 30% and even seasoned premiums rose over 10%. Interestingly, prepayments for FNMA 30-year 6.5’s only increased about 6% from February, while their FHLMC counterparts jumped by 20%. The pick-up in speeds was also seen in the GNMA market, where almost all coupon buckets experienced an increase of at least 10%, led by the 30-year 5.0’s at 24%. GNMA 30-year 4.0’s continue to prepay at an extremely fast rate, with speeds faster than 4.5’s and 5.0’s. This is hardly a one month event; it has been occurring for the past year and a half. Actual pool CPR speeds of selected coupon buckets and corresponding model forecasts are shown in the tables below.

v4.3.4a

	FNMA 15			FNMA 30			FHLMC 15
Coupon	Actual	Model	Current Balance	Actual	Model	Current Balance	Actual	Model	Current Balance
4.0	7.04	7.96	$27,781,863,220	6.79	3.4	$563,525,916	7.39	7.97	$36,493,786,088
4.5	9.12	8.5	$110,350,778,701	7.2	3.1	$41,590,392,558	9.01	8.43	$108,402,790,502
5.0	11.6	10.27	$114,201,579,352	9.33	3.46	$341,622,930,367	11.14	9.8	$91,587,571,962
5.5	13.81	12.24	$42,585,157,802	13.33	8.6	$434,979,169,305	13.79	12.21	$28,891,069,745
6.0	17.55	16.62	$21,078,696,721	18.11	15.52	$173,480,818,567	16.99	15.79	$16,582,582,971
6.5	19.82	19.26	$7,945,539,269	22.19	18.49	$62,957,131,055	19.13	18.18	$6,322,866,346
7.0	21.51	21.26	$2,716,655,950	26.88	23.28	$24,174,497,925	20.48	20.49	$2,229,591,613
7.5	23.16	23.52	$1,050,374,178	27.31	27.8	$8,003,691,151	21.52	22.2	$905,606,344
8.0	23.44	26.11	$374,908,169	25.57	31.12	$3,707,197,622	20.74	24.86	$316,345,959

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