Amherst sees sharp decline in private-label MBS prepays coming soon

Prepayment speeds on private-label mortgage-backed securities should continue at elevated levels for another month’s worth of data before decreasing sharply, according to Amherst Securities Group. Prime and Alt-A fixed mortgage loans led the way for voluntary prepayments in November. Amherst said prepayment speeds on always performing loans were 15% per annum that month, with one-quarter of all prime, fixed borrowers prepaying and those with more than 20% equity prepaying at 40% per annum. The data is reported with a six-week lag and reflect interest rates from September and October. Amherst said rising rates in November should slow prepayment speeds in its next report. Analysts said the number of re-performing loans and modified loans continues to grow while the level of non-performing loans shrinks. The re-performing loan bucket, which grew nearly 10% in April, rose 0.7% to $13.7 billion in December, highlighting “the continued winding down of loan modification activity,” according to Amherst. Liquidations are declining and analysts expect this trend to continue because of the problems arising from the robo-signing debacle of last fall. December liquidations in private-label MBS fell to $8.2 billion from $13 billion a year earlier and an average of $9.2 billion for September and October. Analysts said it will take a little more than four years to clear the current non-performing loan population with $411.5 billion non-performers and roughly $8.2 billion liquidations a month. Write to Jason Philyaw.