The Sky is NOT Falling

I recently saw a headline reading, “Prepayments hit two-year high”.  While true, it sounds more alarming than it is.  

Total speeds for FNMA loans hit a high of 5.7% in August. That is still less than 100PSA and way below the CPR peak of 35% in October of 2020.

Additionally, most of the increase came from the >= 7’s, and a bit from the 6.0-6.99% tranche (see chart).  Only 3% of Fannie loans outstanding have coupons over 7% and another 8% over 6.

Portfolios, overall, are not immune to increased speeds, but they certainly are resistant.

Get in touch with us to see the proprietary L1A Prepay Propensity Report, at a loan level, on your portfolio.