November 26, 2014
By Bob Judge
Editor, CPR Report
As to the cause, we saw an increase in defaults that were more than offset by a decrease in voluntary prepayments.
Defaults, which rose by 37%, remained below 2% for the 13th month in a row. Additionally, the reading this month was the 22nd lowest since 1999.
As for voluntary prepayments, they fell back below 6% after one month above this benchmark. This is also the 4th time this year that we have seen voluntaries below 6%.
As for the detail, overall prepayments fell 2% to 7.79% from 8.14% in August.
In comparing prepayment speeds for the first nine months of 2014 to the same period in 2013, we see that this year is running 6.70% ahead of last year, 7.64% versus 7.16%.
As for the largest sector of the market, 20+ years to maturity, prepayment speeds fell by 7% to 7.75% from 8.29%.
Turning to the CPR breakdown, the default CPR increased by 37% to 1.84% while the voluntary prepayment CPR fell by 12% to 5.96%.
Preliminary data for next month suggests that prepayments will remain close to September levels and remain below 8%.
Turning to our maturity buckets, prepayment speeds fell in two out of six categories.
Decreases were seen, by order of magnitude, in the 10-13 year sector (-9% to CPR 8.14%) and 20+ (-7% to CPR 7.75%).
Increases were seen, also by order of magnitude, in 16-20 (+51% to CPR 8.07%), <8 (+23% to CPR 13.48%), 8-10 (+11% to CPR 6.20%) and 13- 16 (+6% to CPR 3.67%).
As we near the end of 2014, prepayment speeds have leveled off in the high 7s to low 8s, which represents a single digit percentage increase over last year.