FHLMC 7/1			FHLMC 10/1
Coupon	Actual	Model	Current Balance	Actual	Model	Current Balance
3.25	-	-	-	-	-	-
3.5	-	-	-	-	-	-
3.75	-	-	-	-	-	-
4	-	-	-	-	-	-
4.25	-	-	-	-	-	-
4.5	10.53	8.18	$560,458,381	-	-	-
4.75	8.77	9.43	$2,040,476,009	-	-	-
5	11.52	10.95	$5,871,682,729	10.34	8.28	$790,619,453
5.25	12.44	12.52	$6,269,714,079	9.75	10.27	$1,720,951,477
5.5	12.28	12.6	$2,789,632,920	9.23	10.1	$2,939,016,235
5.75	11.86	13.2	$1,466,202,959	7.18	9.02	$944,556,994
6	9.11	10.49	$1,071,758,368	9.36	9.47	$765,936,973

The decreases in prepayments from December to January were widely expected, as January is typically the slowest month for refinancing activity. We usually attribute this to the so called “holiday effect,” which describes the lack of focus borrowers have on their loans due to the Christmas and New Year’s holidays. Also, seasonal home sales are at their lowest because January is the middle of winter for much of the Midwest and East Coast.

Looking forward to February’s prepayments, we expect to see 5%-10% declines in fixed rate collateral due to a small rise in mortgage rates and the shortened month. In March, however, we anticipate big spikes in prepayments. As the seasonal pick-up in home sales accelerates, we gain a couple more business days, and we see the effects of the 20bp drop in mortgage rate that we saw throughout February.

Clients may go to http://dynamic.ad-co.com/performance/ to link directly to the performance reports used to generate these numbers and analyze the data in more detail.