Prepayment rates for mortgage-backed securities fell 9.5% overall in June from a constant prepayment rate of 13.1CPR to 11.9 CPR, according to Credit Suisse.
Writing in the "June 2008 Fixed Rate Prepayment Commentary," Credit Suisse researchers Mahesh Swaminathanand Chandrajit Bhattacharya reported that the speeds of 30-year 2007 5.5% coupons slowed by a constant prepaymentrate of 1 CPR, while 6.0% and 6.5% coupons declined 3 CPR.
The Credit Suisse analysts also reported that the estimated net issuance of fixed-rate MBS declined from $67.5billion in June to $58.9 billion, a decrease of 12.8%.
The estimated net issuance of 30-year Fannie Mae and Freddie Mac MBS fell from $47.4 billion to $39.6 billion,while estimated issuance of 30-year Ginnie Mae securities jumped from $14.6 billion to $18.6 billion, they said.
The Credit Suisse analysts predicted that speeds would decline further in July.
"Despite an increase in day counts in July, we expect prepayments on moderately seasoned premium paper todecline by 15-20% for 30-year coupons and by 19-24% for 15-year coupons in light of the [40 basis-point] increasein mortgage rates during June," the analysts said. "Speeds on seasoned discounts are expected to declinemore modestly, by about 5-10% during the same period."***Fitch Ratings recently published a study that describes quantitative credit metrics for various asset classes,including mortgages, and identifies "parallel analytical concepts" across structured finance producttypes.
The credit metrics include measures of (on a loan level) borrower credit quality, debt repayment capacity, andcollateral, and (on a pool level) portfolio risk such as borrower and sector concentrations, the rating agencysaid.
The study also points to differences in the applicability of certain metrics to different structured assets. Forexample, Fitch said measures of borrower leverage, such as loan-to-value ratios, are "fundamental" toanalyzing residential and commercial mortgage lending but "largely irrelevant" to unsecured lending inwhich the borrower has no equity in the underlying asset.
"Similar to the universe of corporate issuers where cash flow, leverage, and profitability concepts providea basis for benchmarking the credit quality of companies in a wide variety of industries, this new study seeksto provide insight into credit concepts that bridge the analysis of structured finance asset types," saidMariarosa Verde, managing director and head of Fitch Credit Market Research.
The study is titled "Unstructuring Structured Finance."
