Prepay Speeds on Broker Originated Loans

Conventional wisdom holds that loans originated by mortgage brokers tend to prepay faster than those originated through retail channels. Our data generally supports this contention depending on where we are in the interest rate cycle.

When mortgage rates are declining (yellow line below) brokers seem much more adept at successfully pursuing refis. Speeds on broker originated loans are a large multiple (1.1-1.3x) of speeds on retail originated loans (blue line).

Conversely, when mortgage rates are rising, broker refi performance is only a fraction of their retail competitors (0.8-0.9x).

It does make intuitive sense that brokers, with their lower fixed costs, have more flexibility than retail originators to enter/exit the market as market conditions change.