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MBS Market Strategies

April 2015

Drew SimmonsVice President

[email protected] 2015 - Prepayment Summary

March SpeedsFor the second straight month, all 3 agency speeds increased, up 17-32% from February. The highest prints came from 30yr terms with Fannies up 3.6 CPR to 19.2 and Freddies up 3.8 CPR to 20.2. Ginnie 30yrs experience a similar jump to 21.2 for GNIs while GNIIs posted the fastest speeds since December 2009 @ 25.7. Conventional 15yrs increased to 12.4 CPR for both Freddie and Fannie, the highest since August 2013. Ginnie 15yrs also posted near 2yr highs at 14.7 CPR for GNIs and 13.9 CPR for GNIIs. Within 20yr terms, Fannie and Freddies increased to 14.8 and 15.3 CPR respectively. Ten-year terms showed the smallest gains over the past 2 months, with Fannies up 2.1 CPR to 12.5 and Freddies experienced a 1.8 CPR increase to 11.7.

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15FNMA 10.5 11 12.3 12.7 12 11.9 11.9 11.5 13.5 11.6 15.6 19.2FHLMC 10.9 11.5 12.6 13 12.4 12 12.4 12.2 13.8 12.2 16.4 20.2GNMA I 16.2 17.3 17.5 17.9 16.9 16.5 16.5 15.6 16.7 14 17.3 21.2GNMA II 11.6 12.8 14 14.3 14.1 14.1 14.5 15.4 16.8 14.1 21.9 25.7

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1-mo CPR

30-Year Fixed MBS Historical Prepayment Speeds

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15

FNMA 8.2 8.6 10.1 10.8 9.8 9.9 9.9 9.1 10.6 9.6 11.9 14.8FHLMC 8.6 9.2 10.6 10.8 10.2 9.9 10.4 9.2 10.7 9.5 11.5 15.3

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1-mo CPR


Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15FNMA 8.8 9.4 10.2 10.7 9.9 9.7 9.8 8.8 10.3 9 10 12.4FHLMC 9 9.7 10.5 10.7 10.3 9.3 10 9.2 10.1 9.1 10.1 12.4GNMA I 12.2 13 13.4 13.7 13.1 13.6 13.3 11.9 13.2 11.4 11.9 14.7GNMA II 10.5 10.6 11.5 12.8 11.4 11.8 12.4 11.9 12.6 10.8 11.4 13.9

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1-mo CPR



FNMA 10 10.3 11.3 11.7 11.2 10.8 11 10.1 11.3 10.4 10.5 12.5FHLMC 9.9 10.3 10.7 10.7 10.9 9.9 10.9 9.8 10.5 10.1 9.9 11.7

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1-mo CPR


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2.5 3 3.5 4 4.5 5 5.5

15-Year by Issuer

FNMA FHLMC GNMA I GNMA II

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3.0 3.5 4.0 4.5 5.0 5.5 6.0

30-Year by Issuer

FNMA FHLMC GNMA I GNMA II

April 2015


MBS Market Strategies Specified Pools

Loan SizeAfter posting relatively flat prints in February, pools with loan sizes of $85K or less “caught up” a touch for March but most of the biggest gains continued for larger loan sizes. The biggest increases came from recent vintage jumbos and high loan balance collateral. Fannie 30yr 4.5s of 2010 have increased more than 60% since January, up 7 CPR from February to 27.5. Low-loan balance pools within this cohort increased 2 CPR to 13.1.

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-14

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-15

CPR

FNMA 15-Year 2010 4s by Loan Size

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+

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2025303540

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CPR

FNMA 30-Year 2010 4.5s by Loan Size

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+ Cohort3mo 12 12.8 13.5 14.6 15.5 17.2 15.96mo 12.2 12.8 13.2 13.8 13.6 16.6 15.512mo 12.5 13.2 13.6 14.5 15.5 16.6 15.612mo Prepay Ratio 0.80 0.85 0.87 0.93 0.99 1.06 1.00

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Prepay RatioCPR

FNMA 15-Year 2010 4s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

<85K 85K-110K 110K-150K 150K-175K 175K-225K 225K+ Cohort3mo 10.6 12.7 14.7 15.3 16.1 21.5 206mo 10.6 12 13.7 14.2 15.4 19.5 18.312mo 10.9 12 13.2 14.1 15.4 17.6 16.712mo Prepay Ratio 0.65 0.72 0.79 0.84 0.92 1.05 1.00

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Prepay RatioCPR

FNMA 30-Year 2010 4.5s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

April 2015



Investor PoolsInvestor collateral continued to show mixed results in March. Fannie 30yrs of 2010 with 50-100% investor collateral paid 3.2 CPR slower than the cohort while Investor 15yr 2010s paid about 3.7 CPR slower.

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CPR

FNMA 15-Year 2010s 50%-100% Investor

Cohort 50-100% Investor

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CPR

FNMA 30-Year 2010s 50%-100% Investor


50-100% Investor Cohort3mo 16.1 14.76mo 17.3 14.212mo 16.4 14.212mo Prepay Ratio 1.15 1.00

0.90

0.95

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Prepay RatioCPR

FNMA 15-Year 2010s Investor %- Avg CPRs (left) | 12mo Prepay Ratio (right)


50-100% Investor Cohort3mo 17.6 18.76mo 17.1 16.912mo 16.4 15.512mo Prepay Ratio 1.06 1.00

0.97

0.98

0.99

1.00

1.01

1.02

1.03

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1.05

1.06

1.07

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Prepay RatioCPR

FNMA 30-Year 2010s Investor % - Avg CPRs (left) | 12mo Prepay Ratio (right)

April 2015



Geographic DistributionSpeeds in California have increased the most over the past few months, up 6 CPR on the year to 20.6 for 30yrs. The slowest speeds continued to be in NY pools, paying an average 10 CPR over the past 3 months after reaching a 6yr low of 8.2 CPR in December.

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CPR

FNMA 15-Years by Geographic Distribution

CA FL NY TX US

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CPR


CA FL NY TX US

NY TX CA FL US3mo 9.7 12.5 17.1 12.6 13.56mo 9.5 12.3 15.3 12.3 12.612mo 9.3 12.9 13.5 12.5 12.012mo Prepay Ratio 0.77 1.07 1.12 1.04 1.00

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Prepay RatioCPR


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PR NY HI DE CT PA MN NJ NM LA Avg FL MO TN TX KS CO AZ CA MI NV

12-M

onth

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CPR

FNMA 30-Year Speeds by State

Slowest 10 Fastest 10

April 2015



Origination ChannelBoth Retail and Third-Party Originated Pools increased this month within Fannie 30yrs of 2010 while TPO pools declined for FN 15yrs of the vintage.

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CPR

FNMA 15-Year 2010s by Origination Channel

100% TPO 100% Retail

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CPR

FNMA 30-Year 2010s by Origination Channel

100% TPO 100% Retail

Servicer ConcentrationFannie 15yr 4s of 2010 showed increases from most of the predominate servicers in March, led by Roundpoint which increased about 5 CPR to 20.3. Quicken’s average 6mo speeds have gradually declined to be in line with the cohort while the 12mo CPR for Quicken remains elevated.

0 5 10 15 20 25

QUICKEN LOANS INC.

ROUNDPOINT MORTGAGE SERVICING CORPORATIO

BANK OF AMERICA, N.A.

PNC BANK, N.A.

WELLS FARGO BANK, N.A.

OCWEN LOAN SERVICING, LLC

PHH MORTGAGE CORPORATION

SUNTRUST MORTGAGE INC.

JP MORGAN CHASE BANK, NA

CITIMORTGAGE, INC.

6mo, 12mo CPRs - FNMA 15-Year 2010 4s by Servicer

6mo CPR

12mo CPR

April 2015



Credit Score

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Oct

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Nov

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Dec-

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CPR

FNMA 15-Year 2010 by Credit Score

Cohort 0-699 700-759 760-900

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CPR

FNMA 30-Year 2010s by Credit Score

Cohort 0-699 700-759 760-900

0-699 700-759 760-900 Cohort3mo 10.3 16 14.2 14.76mo 14 15.7 13.6 14.212mo 15.5 15.9 13.5 14.212mo Prepay Ratio 1.09 1.12 0.95 1.00

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Prepay RatioCPR


0-699 700-759 760-900 Cohort3mo 18.1 19.7 17.8 18.76mo 17.3 18.3 15.5 16.912mo 16.5 16.9 13.9 15.512mo Prepay Ratio 1.06 1.09 0.90 1.00

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April 2015



Loan-to-Value

0-79 80-89 90-99 100-125 Cohort3mo 18.2 21.1 20.2 20 18.76mo 16.3 19.6 18.6 18.1 16.912mo 14.9 18.5 17.1 16.3 15.512mo Prepay Ratio 0.96 1.19 1.10 1.05 1.00

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Prepay RatioCPR

FNMA 30-Year 2010s by LTV

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Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15

CPR

FNMA 30-Year 2010s by LTV

Cohort 0-79 80-89 90-99 100-125

April 2015



Cpn % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR10-Year 2.5 18% 1.6 10.5 9.0 11% 1.0 9.8 8.8

3.0 25% 2.9 14.1 11.2 14% 1.5 11.9 10.53.5 15% 2.0 15.3 13.3 25% 3.2 15.9 12.74.0 13% 2.1 18.2 16.1 20% 3.1 18.6 15.4

All 10y 20% 2.1 12.5 10.5 18% 1.8 11.7 9.9

15-Year 2.5 27% 1.7 8.1 6.3 19% 1.3 8.1 6.8 33% 2.3 9.4 7.1 42% 2.5 8.6 6.03.0 25% 2.6 13.1 10.5 23% 2.5 13.1 10.6 7% 0.8 12.6 11.7 22% 2.5 13.6 11.23.5 25% 2.8 14.3 11.5 29% 3.3 14.7 11.4 40% 4.9 17.0 12.2 17% 2.9 20.0 17.14.0 27% 4.0 18.6 14.6 34% 4.9 19.6 14.7 29% 4.0 17.6 13.6 28% 4.4 20.5 16.14.5 19% 3.0 18.9 15.9 17% 2.8 18.9 16.1 18% 2.4 15.8 13.4 -1% -0.1 15.8 15.95.0 16% 2.5 18.6 16.1 14% 2.4 18.6 16.3 11% 1.6 15.5 13.9 34% 5.1 20.5 15.35.5 24% 3.7 19.3 15.6 12% 2.0 18.9 16.9 39% 4.8 17.1 12.3 11% 1.8 19.0 17.1

All 15y 24% 2.4 12.4 10.0 23% 2.3 12.4 10.1 23% 2.7 14.7 11.9 22% 2.5 13.9 11.4

20-Year 3.0 26% 1.9 9.3 7.4 35% 2.4 9.1 6.73.5 17% 2.3 16.1 13.7 36% 4.2 15.7 11.64.0 35% 4.8 18.8 13.9 40% 5.9 20.5 14.64.5 35% 5.8 22.6 16.8 36% 6.1 23.2 17.15.0 28% 4.5 20.3 15.8 15% 2.2 17.7 15.5

All 20y 24% 2.9 14.8 11.9 32% 3.7 15.3 11.5

30-Year 3.0 31% 1.8 7.6 5.8 33% 1.9 7.4 5.6 27% 3.0 14.2 11.2 30% 3.0 13.1 10.13.5 18% 2.4 15.8 13.4 18% 2.4 16.3 13.9 22% 3.7 20.2 16.5 22% 4.5 24.9 20.44.0 21% 4.5 25.6 21.1 19% 4.2 26.5 22.3 25% 4.7 23.7 19.0 14% 4.6 37.5 32.94.5 30% 5.9 25.4 19.5 36% 7.1 26.9 19.8 23% 4.9 25.6 20.8 20% 5.1 30.4 25.35.0 29% 5.2 23.6 18.4 31% 5.9 25.0 19.1 22% 3.9 21.7 17.8 30% 5.9 25.5 19.65.5 23% 4.3 23.2 18.8 22% 4.3 24.5 20.1 17% 3.0 20.2 17.2 19% 3.2 19.9 16.76.0 19% 3.6 22.9 19.3 16% 3.2 23.6 20.4 19% 3.1 19.4 16.3 7% 1.3 19.0 17.7

All 30y 23% 3.6 19.2 15.6 23% 3.8 20.2 16.4 23% 3.9 21.2 17.3 17% 3.7 25.7 21.9

Prod % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR2014 -5% -0.6 13.0 13.62013 2% 0.7 34.1 33.52012 -7% -2.5 31.3 33.82011 19% 2.9 18.0 15.2

All 3x1 2% 0.4 21.0 20.6

2014 19% 5.9 36.6 30.72013 17% 5.0 34.5 29.52012 37% 8.6 31.8 23.22011 43% 10.4 34.2 23.92010 32% 7.5 30.8 23.32009 27% 5.1 24.0 18.9

All 5x1 27% 7.0 33.0 26.0

2008 113% 23.4 44.2 20.8 -97% -23.2 0.8 24.12007 707% 9.2 10.4 1.3 -78% -1.2 0.3 1.62006 -95% -8.4 0.4 8.8 42% 3.6 12.0 8.52005 -18% -2.6 11.5 14.1 31% 3.6 15.0 11.42004 10% 1.0 11.3 10.3 17% 1.9 13.1 11.2

All 7x1 23% 2.2 11.8 9.6 17% 2.0 13.3 11.4

2007 -61% -14.3 9.0 23.3 11% 4.2 41.1 36.82006 153% 6.5 10.8 4.3 -31% -12.4 28.0 40.42005 565% 33.1 39.0 5.9 35% 8.2 31.4 23.22004 -46% -15.8 18.3 34.1 47% 6.7 21.2 14.5

All 10x1 9% 1.1 13.7 12.7 8% 1.6 23.1 21.5

Hybrid MBS - CPR Change

Fixed MBS - CPR ChangeFNMA FHLMC GNMA I GNMA II

10x1 Treas

FNMA FHLMC GNMA

3x1 Treas

5x1 Treas

7x1 Treas

Prepayment Chart Book

April 2015



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CPR

10-Year FNMA Historical Speeds by Coupon

2% 2.5% 3% 3.5% 4% 4.5%

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10-Year FHLMC Historical Speeds by Coupon

2% 2.5% 3% 3.5% 4% 4.5%

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2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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3% 3.5% 4% 4.5% 5% 5.5% 6%

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3% 3.5% 4% 4.5% 5% 5.5% 6%

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3% 3.5% 4% 4.5% 5% 5.5% 6%

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CPR

GNMA 3x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

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CPR

GNMA 5x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

April 2015



02468

101214161820


CPR

15-Year GNI Historical Speeds by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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CPR

15-Year GNII Historical Speeds by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%

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CPR

30-Year GNI Historical Speeds by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%

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CPR

30-Year GNII Historical Speeds by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%

2% 2.5% 3% 3.5% 4% 4.5%Mar-15 6.9 9 11.2 13.3 16.1 19.3Feb-15 7.3 8.5 11.4 13.3 17.1 17.3

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CPR

Monthly Change - FNMA 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5%Mar-15 8.1 13.1 14.7 19.6 18.9Feb-15 6.8 10.6 11.4 14.7 16.1

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CPR

Monthly Change - FHLMC 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-15 8 13.1 14.3 18.6 18.9 18.6 19.3Feb-15 6.3 10.5 11.5 14.6 15.9 16.1 15.6

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CPR


2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-15 8.1 13.1 14.7 19.6 18.9 18.6 18.9Feb-15 6.8 10.6 11.4 14.7 16.1 16.3 16.9

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20

25

CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 7.4 13.7 13.9 16.8 15.8 15.3 15.7Feb-15 5.5 10.2 12 14.7 16.2 15.1 15.2

02468

1012141618

CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 6.7 11.6 14.6 17.1 15.5 14.9 14.5Feb-15 5 8.1 11.5 16.1 16.4 16 16.2

02468

1012141618

CPR


April 2015

INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The data provided in these reports is for informational purposes only and is intended solely for your private use. Information herein is believed to be reliable but The Baker Group LP does not guarantee its completeness or accuracy. Opinions constitute our judgment and are subject to change without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your Baker representative. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.



3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 7.6 15.8 25.6 25.4 23.6 23.2 22.9Feb-15 5.8 13.4 21.1 19.5 18.4 18.8 19.3

0

5

10

15

20

25

30

CPR


3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 7.4 16.3 26.5 26.9 25 24.5 23.6Feb-15 5.6 13.9 22.3 19.8 19.1 20.1 20.4

0

5

10

15

20

25

30

CPR


2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-15 9.4 12.6 17 17.6 15.8 15.5 17.1Feb-15 7.1 11.7 12.2 13.6 13.4 13.9 12.3

02468

101214161820

CPR

Monthly Change - GNMA 15-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-15 6 11.2 17.1 16.1 15.9 15.3 17.1Feb-15 6.1 9.9 16.7 16.5 13.2 19.6 19.2

0

5

10

15

20

25

CPR

Monthly Change - GNMAII 15-Year by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 14.2 20.2 23.7 25.6 21.7 20.2 19.4Feb-15 11.2 16.5 19 20.8 17.8 17.2 16.3

0

5

10

15

20

25

30

CPR

Monthly Change - GNMA 30-Year by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-15 13.1 24.9 37.5 30.4 25.5 19.9 19Feb-15 10.1 20.4 32.9 25.3 19.6 16.7 17.7

05

10152025303540

CPR

Monthly Change - GNMAII 30-Year by Coupon

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