Borrowers with loans in various types of MBS and ABS could be stretched as interest rates increase, according to industry analysts. Prepayment rates are also likely to slow.
Loan payoffs through refinancing and the like declined during the fourth quarter while buyouts plummeted. On an annual basis, loan removals were largely flat. (Includes data chart.)
Despite various penalties for early prepayments, FHFA believes multifamily MBS issued by Fannie and Freddie present risk for the FHLBanks. Fannie thinks otherwise.
After a slight blip higher in early-stage delinquencies in November, late-payment rates fell in December for all three agencies. (Includes data chart.)
If the coronavirus continues to wreak havoc and the federal government doesn’t provide additional stimulus, the performance of residential MBS is expected to take a significant hit.
The credit quality of collateralized loan obligations is expected to further deteriorate in the coming months, even though corporate issuers are stabilizing, according to the rating services.
The key factor for TBA investors is prepayment speeds. A quick scan of the FHFA data show that the conditional prepayment rates for UMBS issued by Fannie and those issued by Freddie have remained comparable since the launch of the single security in June.
The GSEs took hits to their net earnings as a result of hedging losses for the third straight quarter. The launch of the uniform MBS pushed Fannie and Freddie into an indemnification agreement.
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