Good morning! Collectively, MBS prepay speeds for the month of April dropped -21% vs. street expectations of -15%. In March of 2020, rates dropped significantly, prompting droves of borrowers to refinance their mortgages. As a result, prepay speeds shot up, making MBS an unattractive investment. Despite April’s drop in prepay speeds, MBS will likely remain unattractive for a little while longer. Because rates dropped back down below 3% in April, we may see prepay speeds go back up in May. In other news, mortgage servicing complaints have just hit a 3 year high, according to the CFPB. One of the primary complaints is that servicers are waiting until borrowers’ forbearances end before addressing their loss mitigation options, which borrowers often find complicated. Given that the foreclosure moratorium is set to end June 30th, it is crucial that servicers address these issues soon.

The 10yr. T-note is +2/32 to yield 1.54%, and the FNMA 30yr. 2.5% is trading at $104-06 to yield just under 1.66% with a +78 spread over the 5.7yr. Treasury curve. Thanks, and have a great weekend!

Cherry Picks

ARMS / FLOATERS

Cost
$104-28
$10mm+ Fannie Mae 7/1 ARM 2.492% #841084 8/47 stated final
Average Life
1.91 yr
Yield
-0.22%
Speed
15% CPB
Spread
-52/z curve
Coupon
2.492%
WAM
304
MTR
28
Loans
1,828
Factor
.5643
Caps
Periodic 5/2/5, Lifetime 7.484%
Floor
1.627%
1 Yr. Libor
+1.627

10 Year Fixed

Cost
$104-10
$2.1mm+ Fannie Mae 10yr am 2.00% #MA4368 5/31 stated final
Average Life
3.2 yr
Yield
.60%
Speed
402 PSA
Spread
+26/I curve
Coupon
2.00%
# Loans
1,109
Origination
2021
Type
Fannie Major
WAM
118
Factor
1.0000

15 Year Fixed

Cost
$103-24
$5.2mm+ Fannie Mae Dwarf 2.00% #MA4095 8/35 stated final
Average Life
4.2 yr
Yield
1.05%
Speed
254 PSA
Spread
+47/I curve
Coupon
2.00%
# Loans
17,399
Origination
2020
Type
Fannie Major
WAM
168
Factor
.7772

20 Year Fixed

Cost
$102-24
$10mm+ Fannie Mae 20yr am 2.00% #MA4333 5/41 stated final
Average Life
6.0 yr
Yield
1.49%
Speed
205 PSA
Spread
+51/I curve
Coupon
2.00%
# Loans
17,404
Origination
2020/2021
Type
Fannie Major
WAM
238
Factor
.9967

30 Year Fixed

Cost
$10-28
$10mm Fannie Mae 30 yr am 3.50% #MA4296 2/51 stated final
Average Life
4.5 yr
Yield
1.84%
Speed
368 PSA
Spread
+119/I curve
Coupon
3.50%
# Loans
92
Origination
2020/2021
Type
Fannie Major
WAM
355
Factor
.9392

Agency CMBS

Cost
$105-10
$17.0mm FNMA 12/10 DUS #BL6689 2.19% coupon 5/2032 stated final
Average Life
10.0 yr
Yield
1.63% + 20/swaps
Speed
0% CPY
Coupon
2.19%
Call Protection
108mo Yield Maintenance
Tier
2
GEO
OH
DSCR
1.33
LTV
75.0%
OCC
94.4%
Factor
1.0000

Agency CMO – 3 Year

Cost
$103-30
$5mm Fannie Mae "Busted PAC" 2.50% #FNR 17-2 KG 2/47 stated final
Average Life
2.7 yr
Yield
.95%
Speed
497 PSA
Spread
+70/I curve
Collateral
Seasoned Fannie 30yr Jumbo 4.00%
Coupon
2.50%
Band
Busted PAC
Avg Life w/ rates +300
7.6 yr
Factor
.3497

Agency CMO – 5 Year

Cost
$105-30
$6.6mm+ Freddie Mac "Pass-Thru" 3.00% #FNR 12-112 DA 10/42 stated final
Average Life
4.4 yr
Yield
1.52%
Speed
282 PSA
Spread
+90/I curve
Collateral
Seasoned Mixed
Coupon
3.00%
Band
Pass-Thru
Avg Life w/ rates +300
6.50 yr
Factor
.2465

Agency CMO – Long End

Cost
$95-11
$12mm Freddie Mac "Sequential" 2.00% #5083 ML 3/51 stated final
Average Life
15.6 yr
Yield
2.36%
Speed
159 PSA
Spread
+45/I curve
Collateral
New 30yr 2.00%
Coupon
2.00%
Band
Sequential
Avg Life w/ rates +300
20.1 yr
Factor
1.0000

Jim Tait is a registered representative with and offers securities through Hanover Securities, Inc. (Hanover), Member FINRA & SIPC. Although this information has been obtained from sources we believe reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Securities that may be shown are subject to availability and changes in price. Past performance is not indicative of future results. Changes in any assumptions may have a material effect on projected results.

 This information from Hanover Securities is for your private use and does not constitute an offer or solicitation with respect to the sale of any security. This information was obtained from sources we believe to be reliable but we do not represent that it is accurate or complete, and it should not be relied on as such. Certain transactions may give rise to substantial risk and are not suitable for all investors. This information was based on current market indicators which may vary over time. We may from time to time buy or sell, or have long or short positions in securities identical or related to those identified herein. 

Although this information has been obtained from sources we believe reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Loans and/or Securities which may be shown are subject to availability and changes in price. Past performance is not indicative of future results. Changes in any assumptions may have a material effect on projected results. This information from Banes Capital Group (BCG) and/or Hanover Securities is for your private use, and was obtained from sources we believe to be reliable. However, we do not represent that this information is accurate or complete, and it should not be relied on as such. This information is for institutional investors only, and as such certain transactions may give rise to substantial risk and are not suitable for all investors. This information was based on current market indicators which may vary over time. We may from time to time buy or sell, or have long or short positions in loans or securities identical or related to those identified herein. 

The pricing of loans or any Level II or III asset is inherently an exercise in quantifying uncertain variables. As such, great care should be taken when pricing loans for reporting purposes. The information included herein should never be taken as the sole method, or even a method to be relied on, for the pricing of loans or other Level II or III assets as this is for informational purposes only.