Thirty-Year Prepayments Slower than Expected in September

Thirty-year mortgage-backed securities prepayments generally came in slower than expected in September, Wall Street research reports show. Aggregate speeds on 30-year Fannie Mae MBS during the month were 11% slower than in September while 15-year product saw smaller declines, according to two firms' reports. A Credit Suisse research report said the slowdown in 15-year product was in line with its expectations and the slowdowns in respective prepayment speeds for different coupons in all products "were similar across the two agencies." Thirty-year 5s, 5.5s and 6s slowed by 9%, 13% and 10%, respectively, and were "significantly slower than expectations," according to a Deutsche Bank report. "September's slow speeds indicate that mortgage originators are not engaging in the aggressive outreach to in-the-money borrowers as they did in 2003 and other recent refi waves, and that borrowers who refi on their own mostly already refinanced last spring," Deutsche Bank said. Speeds could slow going forward due to lower rates, but "any October speedup should be modest," according to the Deutsche Bank report.