By the Numbers
Fast MBS servicers stay fast, slow servicers stay slow
This material is a Marketing Communication and does not constitute Independent Investment Research.
Despite some MBS servicers breaking form last fall, most servicers’ prepayment speeds have stayed in line so far this year with their long-term ranking from fast to slow. The upcoming March print will provide another test of servicers’ efficiency since refi applications climbed at the end of February. But refinance activity should fade in April, a consequence of the recent jump to higher mortgage rates.
Servicers can wield a large influence over the prepayment behavior of their borrowers (Exhibit 1). We can score each servicer’s prepayments from February by how much faster or slower the servicer’s in-the-money loans were than if the same loans had been serviced by the average servicer. We can do the same for speeds over the 12-month period ending in August. The plot shows that slow servicers typically remained slow, and fast servicers typically remained fast. Only Guaranteed Rate stands out as being much faster in February than it was over the longer lookback.
Exhibit 1. Comparing February servicer prepays to 12 months ended August
Conventional 30-year loans. Only loans with positive rate incentive are included. The “Score” is the % fast(slower) a servicer’s loans prepaid compared to similar loans with the typical servicer. Not all names are labeled due to space constraints. Includes the 43 largest servicers plus one point that represents all the smaller servicers.
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
Last fall several servicers prepaid much faster than normal in October, but after October their speeds became slower than normal for a while. A likely explanation is that those servicers were able to pull forward prepayments into October that otherwise would have occurred in November, but that didn’t happen in February. It is possible that the late-February rate rally caused some borrowers to walk away from in-process refinances to apply again at a lower rate.
Rocket’s speeds, excluding loans it acquired from Nationstar, were very fast in February. This behavior was consistent with the longer horizon that ended last August. Nationstar’s loans, which are now owned by Rocket, were a little faster in February but not by an unusual amount. Rocket has not yet exerted a meaningful influence over Nationstar’s prepayments.
Comparing February to January shows that the month-over-month prepayments were steady for almost all servicers (Exhibit 2). Guaranteed Rate stands out as being faster in February than in January, while Rocket and Provident were a little slower.
Exhibit 2. Comparing February to January
Conventional 30-year loans. Only loans with positive rate incentive are included. The “Score” is the % fast(slower) a servicer’s loans prepaid compared to similar loans with the typical servicer. Not all names are labeled due to space constraints. Includes the 43 largest servicers plus one point that represents all the smaller servicers.
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
MBS investors should remain wary that some servicers’ prepayments could accelerate more than other servicers when rates drop. The good news is that last fall the effect reversed in subsequent months, and so far this year most servicers have not yet had an unexpected effect on speeds.
Appendix
Exhibit 3. Data for Exhibit 1
Conventional 30-year loans. Only loans with positive rate incentive are included. The “Score” is the % fast(slower) a servicer’s loans prepaid compared to similar loans with the typical servicer.
“12M Aug 2025” is the 12 months from September 2024 through August 2025.
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
Exhibit 4. Data for Exhibit 2
Conventional 30-year loans. Only loans with positive rate incentive are included. The “Score” is the % fast(slower) a servicer’s loans prepaid compared to similar loans with the typical servicer.
Source: Fannie Mae, Freddie Mac, Santander US Capital Markets.
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