The constant prepayment rate for Fannie Mae 30-year fixed- rate notes with 5 percent coupons, backed by loans with average rates of about 5.5 percent, rose to 20, from 16.5, JPMorgan Chase & Co. said in a note to clients, based on data released today. The CPR, or the share of debt that would be retired in a year at the current pace, for bonds with 6.5 percent coupons, with loan rates of about 7 percent, fell to 21.7, from 23.4.
Mortgage bonds backed by loans with higher rates fell today on reports the government was set to create a new mortgage-aid program, and then partially recovered. Fannie Mae-guaranteed 6.5 percent securities declined to as low as 109.5 cents on the dollar, from 109.78 cents yesterday, before rising to 109.72 cents as of 5 p.m. in New York, according to data compiled by Bloomberg.
“We repeat our view that the possibility of something drastic happening in the near term is low, given the political climate and the lack of success in recent government programs,” Jeana Curro, a mortgage-bond strategist at RBS Securities Inc. in Stamford, Connecticut, wrote today in a note to clients.
President Barack Obama’s administration isn’t considering a new program allowing Fannie Mae and Freddie Mac to forgive residential mortgage debt that exceeds the current market value of a property, according to a Treasury Department spokesman.
“The administration is not considering a change in policy in this area,” Andrew Williams, the spokesman, said today.
The average rate on a typical 30-year mortgage fell to a record low 4.49 percent in the week ended today, down from this year’s high of 5.21 percent in April, according to Mclean, Virginia-based Freddie Mac. Rates averaged about 4.74 percent in June; loans usually close a month or two after applications.
Mortgage-bond prepayments are driven by refinancing, home sales and purchases of delinquent debt out of the securities by Fannie Mae and Freddie Mac, the government-supported mortgage- finance companies.
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.
source: www.bloomberg.com
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