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by Dr Thomas J Healy, CMB
The Sky is NOT Falling
Thursday, October 3, 2024
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.
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