Fannie Mae Benchmark CPR™ Commentary – Oct 2020
The September 30-year Benchmark CPR3 (BCPR3) for the Fannie Mae cohort declined for the third straight month, coming in at 34.5 CPR, a 1.4% decrease from the 35.0 CPR observed in August. While the 3-Month benchmark showed a modest slowdown, its most recent one-month component increased 3.2% (from 33.9 to 35.0). There continues to be significant and persistent rate incentive in the market; using a 2.88% driving 30-year mortgage rate, we estimate that 64% of all mortgages are at least 50 bps in the money, and this rises above 78% when looking at conventional mortgages only. Prepayment speeds should remain elevated as the industry continues to work thorough this potential supply despite the well-publicized capacity constraints faced by originators.