Lower coupon mortgage-backed security prepayment speeds, which largely decelerated as expected in July, are forecast to continue decelerating to some extent in August. "I think we slow again," said Art Frank, director and head of mortgage-backed securities research at Deutsche Bank. But the slowdown in speeds could decelerate somewhat due in part to August's seasonal increase in housing sales, he added. Mortgage-backed security prepayment speeds during July came in closer to expectations than they have been recently with the exception of certain "cusp" coupons. There was a pronounced deceleration in these 5% and 5.5% coupons, according to researchers at three investment banks.
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