Short Term CPR Predictions for Agency MBS: February 2023

Infima projects February prepayment speeds to remain relatively flat for 30-year UMBS pools. Although a short month, February benefits from a slight increase in seasonal factor relative to January, the slowest month of the year. Mortgage rates declined from the high levels seen in November, and January saw an uptick in refi applications that have yet to work their way through the system.

A few moderately seasoned cohorts in the lower coupons, including 2021 2.5%, 2020 3% and 2020 3.5%, are projected to speed up slightly. Some seasoned cohorts could slow down more than the average, likely due to burnout. These include 2013 through 2016, 3% and 3.5%. Also projected to slow down, 2022 4.5% and 5% may see their speeds drop by more than 10%, potentially because of the higher loan size of these recent cohorts.

Looking ahead into March, speeds may slightly increase thanks to a better seasonal factor, higher day count and a more favorable rate environment.