Model Performance - February '07

Prepayments Remain in Winter Slump
by Dan Szakallas

As expected, prepayments spanning both fixed-rate and ARM collateral fell across the board from December to January. Fixed rate 30-year collateral fell on balance weighted average of 5.0% for FNMA’s, and by 7.5% for FHLMC’s. The magnitude of the drops was about the same in the 15-yr collateral coupon stack for agencies as well. For GNMA’s, we saw a balance weighted decrease of 7.0% for 15-yr collateral, and almost 9.0% for 30-year collateral. Looking at FHLMC hybrid ARM data, we saw balance weighted drops between 7%-13% in Libor and Treasury indexed 3/1’s 5/1’s and 7/1’s (all during their initial reset period), but interestingly we saw an increase of about 1% for 10/1’s.

v5.2b Fixed Rate