Doug Duncan, chief economist for Fannie Mae, confirmed what I have been saying about prepay speeds. He stated that 70% of mortgagor applicants will not be able to “make the cut” given the industry’s tighter underwriting standards. I think this gives further credence to my January 6th blog (“12/31 Prepay Speeds are Overstated”) stating that the MSR industry should be using 11/30 prepay speeds for their year-end valuations. This should be a much more accurate reflection of what is going to happen.
To see the entire article, go to the WSJ online :