mbs market strategies - the baker group · 1700 io grande suite 120 austin, tx (888) 480-0301...

Oklahoma City, OK | Atlanta, GA | Austin, TX | Indianapolis, IN | Salt Lake City, UT | Springfield, IL | www.GoBaker.comThe Baker Group | 1601 Northwest Expressway, 20th Floor | Oklahoma City, OK 73118 | 800.937.2257 | Member FINRA and SIPC

MBS Market Strategies

April 2016

Drew SimmonsVice President

[email protected](866) 214-1153

April 2016 - Agency MBS Prepayments

Financial Strategies Group

The Baker Group LP | Headquarters1601 NW Expressway, 20th Floor

Oklahoma City, OK 73118(800) 937-2257

Austin, TX1700 Rio Grande, Suite 120

Austin, TX 78701(888) 480-0301

Springfield, IL 901 Community Drive

Springfield, IL 62703(888) 333-7704

Indianapolis, IN 8365 Keystone Crossing, Suite 100

Indianapolis, IN(866) 370-3580

Salt Lake City, UT2975 West Executive Pkwy, Suite 139

Lehi, UT 84043(800) 288-9411

Contact Information

www.GoBaker.com

Atlanta, GA 2300 Windy Ridge Parkway, Suite 76

Atlanta, GA 30339(800) 937-2257

• Speeds in March increased 19%-50% month-over-month, led by 30yr Fannie and Freddie issued pools

• Prints were the fastest since last June, the result of a higher day count, increased refi activity, lower rates and about 20% more home purchase activity

• Both Fannie and Freddie 30yr pools increased about 5 CPR on the month to 15.6, a 49% and 50% increase respectively

• Fannie 20yrs added 3.6 CPR to 12.4 (+40%) and Freddie 20yrs increased 3.4 CPR to 12.2 (+38%)

• Within 15yr terms, Fannies were up 2.7 CPR to 11.4 (+31%) with Freddies adding 2.7 CPR to 11.1 (+32%)

• Ten-year terms had a more modest increase with Fannies up 2.1 CPR to 13.2 (+19%) and Freddies increasing 2.3 CPR to 12.4 (+22%)

• The biggest increases in government paper came from Ginnie II 30yrs which added 5.5 CPR to 19.7 (+39%) while Ginnie I 30yrs increased 3.3 CPR to 19.4 (+21%)

• Ginnie II 15yrs increased 2.9 CPR to 13.3 (+28%) and Ginnie I 15yrs added 2.6 CPR to 14.6 (+22%)

• From a collateral perspective, the 2014 vintage had the fastest speeds in March, especially in higher loan balance pools. The average loan size from the MBA’s refinance index reached an all-time high of $342K in February and remains well above the 5yr average of $230K

MBA Refinance Index - Average Loan Size

April 2016



March SpeedsThe biggest month-over-month increase in the coupon stack came from 30yr 3.5s with Fannies increasing 84% to 14.4 and Freddies up 96% to 14.6. This was followed by 20yr 3s which showed a 60% increase for Fannies to 10 CPR and a 72% increase for Freddies to 9.3 CPR. This time last year, jumbos printed some of the fastest speeds on record, nearing 60 CPR on some vintages. Last month, jumbos led the increase in specified pools with 2014 3.5s nearing 40 CPR. While speeds across the board experienced a notable jump, the increase wasn’t all that surprising. The higher day count by 3 days increased speeds by 15% and it’s fairly typical to see an increase in home purchases in March. The best protected collateral from faster prints came from shorter term, high coupon, low loan balance collateral.

Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16FNMA 16.6 15.9 16.3 14.4 12.8 12.6 12.6 10.9 12.4 9.5 10.5 15.6FHLMC 16.9 16.5 16.6 14.7 13.1 12.6 12.7 10.9 12.1 9.7 10.4 15.6GNMA I 20.8 20.3 22 20.6 19.5 19.1 18.2 16 17.6 15.5 16 19.4GNMA II 23.8 21.6 21.9 18.6 17 17.1 15.8 13.7 15.6 13.3 14.2 19.7

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30-Year Fixed MBS Historical Prepayment Speeds

Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

FNMA 12.7 12.7 13.3 12.1 11 10.5 11 9.4 10.5 8.3 8.8 12.4FHLMC 13.1 13 13.7 12.6 11.1 10.6 10.8 9.6 10.4 8.2 8.8 12.2

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Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16FNMA 11.6 11.6 12.4 11.8 10.8 10.2 10.3 8.9 10.2 8.4 8.7 11.4FHLMC 11.7 11.6 12.4 11.6 10.8 10.3 10 8.9 10.1 8.4 8.5 11.1GNMA I 14.5 14.9 16.2 16.8 15 14.8 14.4 12.5 13.5 12.3 12 14.6GNMA II 13.9 13.2 14.3 14.2 12.4 12.4 12.3 10.2 11.6 9.5 10.4 13.3

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FNMA 12.4 12.5 13.7 13.5 12.5 12.2 12.3 10.8 12.3 11 11.1 13.2FHLMC 12.3 12.7 12.8 13.4 12 12 11 10.5 11.5 10.4 10.1 12.4

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FNMA FHLMC GNMA I GNMA II

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FNMA FHLMC GNMA I GNMA II

April 2016


MBS Market Strategies Specified Pools

Loan SizeAs mentioned above, low-loan balance pools increased the least in March with some vintages showing slower speeds. The Fannie 30yr 2011 4% cohort increased 2.3 CPR to 14.8 while LLB pools in this space slowed 0.2 CPR to 12. Fannie 15yr 2011 3.5s showed all loan sizes increasing on the month.

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FNMA 15-Year 2011 3.5s by Loan Size

85K Max 110K Max 150K Max Cohort

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FNMA 30-Year 2011 4s by Loan Size

85K Max 110K Max 150K Max Cohort

85K Max 110K Max 150K Max Cohort3mo 11.3 11 10.9 12.16mo 11.1 11.5 11.2 12.412mo 11.8 12.2 12.2 13.412mo Prepay Ratio 0.88 0.91 0.91 1.00

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FNMA 15-Year 2011 3.5s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

85K Max 110K Max 150K Max Cohort3mo 11.7 11.8 13.1 13.26mo 12.2 12.3 13.3 13.612mo 12.9 13.4 14.5 1512mo Prepay Ratio 0.86 0.89 0.97 1.00

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FNMA 30-Year 2011 4s by Loan Size - Avg CPRs (left) | 12mo Prepay Ratio (right)

April 2016



Investor PoolsInvestor pools within Fannie 15yrs of 2011 increased to a modest extent, up 0.3 CPR to 13.6 while the cohort jumped 2.3 CPR to 13. Fannie 30yrs of the same vintage increased 4.1 CPR to 16.1 while investor pools added 2.2 CPR on the month.

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FNMA 15-Year 2011s 50%-100% Investor

Cohort 50-100% Investor

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FNMA 30-Year 2011s 50%-100% Investor


50-100% Investor Cohort3mo 13.1 11.56mo 13.5 11.912mo 15.5 1312mo Prepay Ratio 1.19 1.00

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FNMA 15-Year 2011s Investor %- Avg CPRs (left) | 12mo Prepay Ratio (right)


50-100% Investor Cohort3mo 14.4 13.46mo 15.3 1412mo 17.2 16.112mo Prepay Ratio 1.07 1.00

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FNMA 30-Year 2011s Investor % - Avg CPRs (left) | 12mo Prepay Ratio (right)

April 2016



Geographic DistributionThe best prepayment protection from geographic pools remained in New York and Puerto Rico concentrations which paid 7.1 and 6.8 CPR for 15yrs respectively. The lag in geo-reporting shows speeds fell in-line with the cohorts in February and we’ll expect the same trend with a jump next month.

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FNMA 15-Years by Geographic Distribution

CA FL NY TX US

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CA FL NY TX US

NY TX CA FL US3mo 9.0 10.8 12.3 11.1 10.96mo 9.5 12.2 13.1 11.8 11.812mo 10.6 14.3 16.4 13.2 14.112mo Prepay Ratio 0.76 1.01 1.17 0.94 1.00

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FNMA 30-Year Speeds by State

Slowest 10 Fastest 10

April 2016



Origination ChannelSpeeds in TPO 15yrs of 2011 fell by nearly 6 CPR to 10.2 with retail pools increasing 2 CPR to 12.3. Both TPO and Retail pools increased about 2 CPR on the month within 30yr 2011s, to 18.6 and 15.3 respectively.

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FNMA 15-Year 2011s by Origination Channel

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FNMA 30-Year 2011s by Origination Channel

100% TPO 100% Retail

Servicer ConcentrationQuicken’s most recent speeds have been trending down and the most recent speeds within Fannie 15yr 3.5s showed their serviced pools increased to the same degree as the cohort, up 2.7 CPR to 13.8. However, the 2014 vintage showed Quicken accelerating by as much as 50% higher than the cohort.

0 2 4 6 8 10 12 14 16

QUICKEN LOANS INC.

WELLS FARGO BANK, N.A.

JP MORGAN CHASE BANK, NA

U.S. BANK N.A.

CITIMORTGAGE, INC.

SUNTRUST MORTGAGE INC.

PHH MORTGAGE CORPORATION

BANK OF AMERICA, N.A.

NATIONSTAR MORTGAGE, LLC

PNC BANK, N.A.

DITECH FINANCIAL LLC

6mo, 12mo CPRs - FNMA 15-Year 3.5s by Servicer

6mo CPR

12mo CPR

April 2016



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 23% 2.2 11.9 9.7 27% 2.4 11.6 9.1

3.0 19% 2.3 14.0 11.8 34% 3.5 13.7 10.23.5 14% 1.9 16.1 14.2 17% 2.2 15.0 12.84.0 22% 3.4 19.1 15.6 13% 2.1 18.1 16.0

All 10y 19% 2.1 13.2 11.1 22% 2.3 12.4 10.1

15-Year 2.5 44% 2.8 9.3 6.5 45% 2.8 9.1 6.3 8% 0.8 10.2 9.5 39% 3.0 10.6 7.63.0 41% 3.3 11.4 8.1 39% 3.1 10.9 7.8 31% 3.4 14.2 10.8 30% 3.2 13.6 10.43.5 25% 2.6 12.9 10.3 23% 2.4 12.8 10.4 29% 3.5 15.9 12.3 23% 3.1 16.6 13.54.0 12% 1.7 15.5 13.8 15% 2.1 16.6 14.5 26% 3.3 16.0 12.7 10% 1.4 16.0 14.64.5 10% 1.6 17.9 16.2 15% 2.4 18.7 16.3 -1% -0.2 15.6 15.8 14% 2.2 18.0 15.85.0 8% 1.3 19.1 17.8 9% 1.5 19.4 17.9 6% 1.0 16.7 15.7 -1% -0.1 16.3 16.45.5 7% 1.1 18.6 17.4 12% 2.1 19.2 17.1 25% 3.1 15.8 12.7 -39% -6.1 9.7 15.8

All 15y 31% 2.7 11.4 8.7 32% 2.7 11.1 8.5 22% 2.6 14.6 12.0 28% 2.9 13.3 10.4

20-Year 3.0 60% 3.8 10.0 6.3 72% 3.9 9.3 5.43.5 50% 4.5 13.4 8.9 46% 4.0 12.8 8.84.0 31% 3.4 14.3 10.9 30% 3.3 14.5 11.24.5 15% 2.2 17.1 14.9 5% 0.7 15.8 15.15.0 13% 1.9 16.6 14.7 18% 2.7 17.5 14.8

All 20y 40% 3.6 12.4 8.8 38% 3.4 12.2 8.8

30-Year 3.0 67% 3.7 9.3 5.6 68% 3.5 8.6 5.1 51% 4.7 14.0 9.3 46% 4.0 12.8 8.83.5 84% 6.6 14.4 7.8 96% 7.2 14.6 7.5 38% 5.0 18.1 13.1 60% 7.3 19.3 12.04.0 56% 6.7 18.8 12.1 55% 6.6 18.6 12.0 32% 5.0 20.9 15.9 30% 5.8 24.9 19.14.5 26% 3.9 19.0 15.1 27% 4.1 19.3 15.1 14% 2.7 22.6 19.9 16% 3.6 25.3 21.85.0 17% 3.0 20.2 17.2 13% 2.4 20.7 18.3 9% 1.8 21.3 19.5 8% 1.7 23.9 22.25.5 6% 1.1 20.3 19.2 9% 1.7 21.2 19.5 9% 1.5 19.4 17.8 9% 1.8 21.3 19.66.0 7% 1.3 20.8 19.5 3% 0.6 20.9 20.3 5% 0.9 18.9 18.1 7% 1.2 20.1 18.9

All 30y 49% 5.1 15.6 10.5 50% 5.2 15.6 10.4 21% 3.3 19.4 16.0 39% 5.5 19.7 14.2

Prod % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR % Chg CPR Chg Mar CPR Feb CPR2014 8% 3.4 47.6 44.32013 1% 0.2 28.6 28.42012 1% 0.2 18.2 18.02011 1% 0.1 17.8 17.7

All 3x1 9% 1.9 21.8 19.9

2014 22% 7.1 39.3 32.22013 15% 4.1 32.3 28.22012 22% 5.2 28.8 23.62011 22% 5.9 32.9 27.12010 28% 4.5 20.8 16.32009 57% 5.9 16.3 10.4

All 5x1 26% 6.1 29.2 23.1

2008 -99% -63.3 0.6 63.9 19% 11.8 73.1 61.32007 43% 7.4 24.5 17.1 101100% 1.0 1.0 0.02006 -56% -12.2 9.6 21.8 -5% -0.6 12.7 13.32005 104% 9.8 19.2 9.4 -15% -3.2 17.3 20.42004 7% 1.1 18.2 17.1 31% 4.5 19.1 14.6

All 7x1 16% 2.4 17.2 14.8 10% 1.5 16.9 15.4

2007 150% 17.4 29.0 11.6 172% 21.0 33.3 12.22006 72% 10.8 25.7 14.9 -26% -10.3 29.7 40.02005 -94% -10.9 0.7 11.5 7% 0.7 10.1 9.42004 130% 16.6 29.3 12.8 67% 8.7 21.5 12.9

All 10x1 64% 7.9 20.1 12.2 22% 3.4 18.7 15.3

10x1 Treas

FNMA FHLMC GNMA

3x1 Treas

5x1 Treas

7x1 Treas

Hybrid MBS - CPR Change

Fixed MBS - CPR ChangeFNMA FHLMC GNMA I GNMA II

Prepayment Chart Book

April 2016



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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

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GNMA 3x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

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GNMA 5x1 Historical Speeds by Production Year

2014 2013 2012 2011 2010 2009

April 2016



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15-Year GNI Historical Speeds by Coupon

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30-Year GNII Historical Speeds by Coupon

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2% 2.5% 3% 3.5% 4% 4.5%Mar-16 9.5 9.7 11.8 14.2 15.6 18.4Feb-16 8.1 9.5 11.9 14.4 17.5 16.9

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CPR

Monthly Change - FNMA 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5%Mar-16 9.1 10.9 12.8 16.6 18.7Feb-16 6.3 7.8 10.4 14.5 16.3

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CPR

Monthly Change - FHLMC 10-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-16 9.3 11.4 12.9 15.5 17.9 19.1 18.6Feb-16 6.5 8.1 10.3 13.8 16.2 17.8 17.4

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2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-16 9.1 10.9 12.8 16.6 18.7 19.4 19.2Feb-16 6.3 7.8 10.4 14.5 16.3 17.9 17.1

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3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-16 6.3 8.9 10.9 14.9 14.7 14.9 14.5Feb-16 5.5 8.3 11 14.5 13.5 14.1 14.9

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3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-16 5.4 8.8 11.2 15.1 14.8 15 15.5Feb-16 5.3 7.5 10.6 14.4 14.9 12.8 13.8

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CPR


April 2016

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-16 9.3 14.4 18.8 19 20.2 20.3 20.8Feb-16 5.6 7.8 12.1 15.1 17.2 19.2 19.5

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3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-16 8.6 14.6 18.6 19.3 20.7 21.2 20.9Feb-16 5.1 7.5 12 15.1 18.3 19.5 20.3

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2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-16 10.2 14.2 15.9 16 15.6 16.7 15.8Feb-16 9.5 10.8 12.3 12.7 15.8 15.7 12.7

02468

1012141618

CPR

Monthly Change - GNMA 15-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-16 7.6 10.4 13.5 14.6 15.8 16.4 15.8Feb-16 6.2 9.8 12.6 14.3 18.2 11.2 15.4

02468

101214161820

CPR

Monthly Change - GNMAII 15-Year by Coupon

3% 3.5% 4% 4.5% 5% 5.5% 6%Mar-16 14 18.1 20.9 22.6 21.3 19.4 18.9Feb-16 9.3 13.1 15.9 19.9 19.5 17.8 18.1

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CPR

Monthly Change - GNMA 30-Year by Coupon

2.5% 3% 3.5% 4% 4.5% 5% 5.5%Mar-16 10.7 12.8 19.3 24.9 25.3 23.9 21.3Feb-16 8 8.8 12 19.1 21.8 22.2 19.6

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20

25

30

CPR

Monthly Change - GNMAII 30-Year by Coupon

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