Mortgage rates slipped a bit lower in October, and have seen a
roughly 35 basis point drop (on monthly averages) since July. However,
prepayments have remained relatively stable over this time period,
largely due to burnout and the seasonality effect that peaked in
August. From September to October, prepayments on the coupons above
rose by an average of 5.3% for FNMC 30-year pools. The MTGENFCL
index on Bloomberg hit a low in the last week of October, so perhaps
we will see some of this effect in the November prepayment numbers
as loans refinanced at that time will be finished processing.
Last month we debuted the new version of the prepayment
model, V5.1- the Enhanced Pool Level Prepayment Model, and in this
issue we continue to track the performance of that model. For actual
pool CPR speeds of selected coupon buckets and corresponding model
forecasts, please refer to the table below.
|
|
FNMA 15
|
FNMA 30
|
GNMA 15
|
GNMA 30
|
|
Coupon
|
Actual
|
Model
|
Actual
|
Model
|
Actual
|
Model
|
Actual
|
Model
|
|
4.5
|
8.6%
|
8.6%
|
7.1%
|
6.7%
|
11.3%
|
10.8%
|
11.2%
|
9.0%
|
|
5.0
|
13.0%
|
17.6%
|
10.7%
|
9.6%
|
13.5%
|
15.8%
|
15.5%
|
13.1%
|
|
5.5
|
20.2%
|
26.3%
|
18.0%
|
17.5%
|
20.1%
|
19.9%
|
21.6%
|
21.5%
|
|
6.0
|
23.3%
|
34.3%
|
28.4%
|
32.9%
|
23.0%
|
25.8%
|
29.0%
|
29.8%
|
|
6.5
|
23.2%
|
35.7%
|
33.6%
|
43.4%
|
24.3%
|
26.2%
|
38.0%
|
42.8%
|
|
7.0
|
24.9%
|
33.9%
|
36.0%
|
44.0%
|
23.5%
|
26.1%
|
41.1%
|
45.0%
|
|
7.5
|
23.5%
|
31.5%
|
37.1%
|
42.5%
|
23.3%
|
26.2%
|
40.7%
|
42.2%
|
The v5.1 Enhanced Pool Level Prepayment Model performed
well across all collateral types. Looking at the different pools,
the model was off by a balance-weighted average of 4.2 CPR for the
FNMA 15 pools, and a balance-weighted average of 1.7 CPR for the FNMA
30's. The GNMA models were also accurate, as the 15-year model was
slightly fast by a balance-weighted average of 1.3 CPR, and the 30-yr
model was also slightly fast by a balance-weighted average of 0.7
CPR across coupons. The model performs very well across the different
collateral types, and enhancements are still being made to this model
to improve fit. Contact Rob Landauer for more information on how to
obtain a trial of this model in its current form.
