Prepayment speeds rose 6% on Fannie Mae mortgage-backed securities and 8% on Freddie Mac mortgage-backeds in November, but they likely will slow in the months ahead, according to Annaly Capital Management.
A report from the New York real estate investment trust, which invests in MBS, said Fannie securities carry a 27% "constant prepayment rate" while Freddie products are a bit higher at 31%.
Annaly said that while speeds rose in November, the expectation is for higher mortgage rates for the remainder of December and January. "Looking ahead, speeds in the near term should be tame relative to rates, especially higher coupons, with January's release estimated to be slow on weak seasonality, day count and mortgage originator capacity constraints," it said.
The company is forecasting continued demand for mortgage-backed securities, but it said the "key themes" for next year include "delinquencies, low supply on weak credit and tighter underwriting standards."