Fannie Mae Benchmark CPR™ Commentary – Aug 2020
After four months of steady increases, prepayment speeds took a summer vacation and slowed down in July bucking market expectations and the persistent low rate environment – we estimate that 64% of mortgages are at least 50 bps in the money assuming 2.99% prevailing rate. Fannie Mae Cohort Benchmark CPR3 (BCPR3) came in at 35.6 CPR for the month of July, which was a 3.5% decrease from the 36.9 CPR observed in June. Individual components of the BCPR3 in Table 1 below show the slowdown in July versus April and how this drives the BCPR3 down. Last month we noted some headwinds to refinance activity via lengthening closing times and pickup in purchase money market and this appears to be manifesting itself in the slower prepayment speeds.