By the Numbers
MBS speeds fall short in April, may rebound in May
This material is a Marketing Communication and does not constitute Independent Investment Research.
MBS prepayment speeds came in slower than anticipated by the pass-through market in April but could turn out to be faster than expected in May. The April TBA dollar roll implied speeds that turned out to be faster than estimated speeds on pools actually delivered into April TBA contracts. April’s delivered pools came in 3 to 4 CPR below the TBA breakeven speeds in 30-year 5.5%s and 6.0%s, although a touch faster in 6.5%s. In May, speeds on delivered pools look more likely to top TBA expectations.
The 30-year TBA dollar roll market in early April anticipated a speed of 18.1 CPR on 5.5% pools for the roll to match the cost of financing through MBS repo (Exhibit 1). But speeds on pools delivered for April came in at an estimated 14.3 CPR. Speeds on pools delivered for the 6.0% roll also came in below breakeven speeds, while pools delivered for the 6.5% roll came in 1 CPR higher.
Exhibit 1. Dollar roll breakeven speeds vs. expectations
April TBA speeds are estimates. May speeds are projections. Roll break even speeds from Yield Book as of 4/7/2026 (April) and 5/6/2026 (May).
Source: Fannie Mae, Freddie Mac, Yield Book, Santander US Capital Markets.
Next month the speeds predicted by the dollar roll market may prove to be slow. The biggest difference is in 5.5%s, which the roll market expects to fall to 7.7 CPR, well below April’s cohort print of 13.7 CPR. Speeds should slow in higher coupons—primarily due to lower day count that is partially offset by faster seasonal turnover, while lagged mortgage rates are roughly unchanged—but not as much as anticipated by dollar rolls.
Overall, Fannie Mae speeds dropped 17% to 9.2 CPR and Freddie Mac speeds fell 19% to 9.9 CPR (Exhibit 2). Higher lagged mortgage rates were responsible for the slowdown, dragging speeds slower in the 5.5% and higher coupons. The biggest drop was in the 6.0% coupon—Fannie slowed 37% to 22.0 CPR from 32.6 CPR, and Freddie 6.0%s were similar. However, discount coupons accelerated as seasonal turnover picked up in April.
Exhibit 2. April 2026 Agency Prepayment Speeds, MoM % Change
Source: Fannie Mae, Freddie Mac, Ginnie Mae, Santander US Capital Markets.
Ginnie Mae speeds slowed 10%, somewhat less than conventionals. Part of the reason was faster buyouts as more delinquent borrowers exited trial payment plans. Voluntary speeds dropped about 14%, closer to the conventional result.
Yield Book’s latest experimental prepayment model performed well on conventional collateral in April, other than on 5.0%s (Exhibit 3). Various iterations of the model have struggled to capture speeds for coupons priced near par. Although this model fared well on 5.5%s and 6.0%s, unlike Yield Book’s production model. Aside from the 5.0%s, model errors were under 5% on most coupons and never more than 10%.
Exhibit 3. FNCL model predicted vs. actual
Shaded cells are more than 10% different from speeds inferred from the daily prepayment report. Blue indicates the model is slower, red indicates the model is faster. Yield Book v97 is the latest experimental model released in April 2026. BAM is v1.47 (current production).
Source: Fannie Mae, Freddie Mac, Yield Book, Bloomberg, Santander US Capital Markets.
The models struggled, however, on Ginnie Mae pools (Exhibit 4). Yield Book’s model was generally 15% to 35% too slow on coupons 5.0% and higher. A possible explanation is that the model did not anticipate the pickup in buyouts in April.
Exhibit 4. G2SF model predicted vs. actual, multiple issuer pools
Shaded cells are more than 10% different from speeds inferred from the daily prepayment report. Blue indicates the model is slower, red indicates the model is faster. Yield Book v97 is the latest experimental model released in April 2026. BAM is v1.47 (current production).
Source: Ginnie Mae, Yield Book, Bloomberg, Santander US Capital Markets.
Prepayment outlook
Speeds in May should fall about 5%. Two fewer business days balanced by faster seasonal turnover should keep lower coupons roughly unchanged next month. The day count effect should be stronger in higher coupons, since it will also slow refinance volume, so higher coupons should drop next month. Lagged mortgage rates are close to unchanged using 21-day and 30-day lags, so refinance activity otherwise shouldn’t change much in May.
Mortgage rates resumed climbing over the past few weeks after falling during the first half of April (Exhibit 4). Rates will likely need to fall below 5.5% to generate a strong pickup in refinance activity.
Exhibit 5. Primary mortgage rates
As of 5/6/2026.
Source: Optimal Blue, Santander US Capital Markets.
Lagged mortgage rates in May are roughly unchanged using 21-day and 30-day lags (Exhibit 5). But they are up 31 bp on a 45-day lag, which should cause prepayments to slow for borrowers with loans that need more time to close.
Exhibit 6. Lagged conventional mortgage rates
As of 5/6/2026.
Source: Optimal Blue, Santander US Capital Markets.
The refinance index has fallen to its lowest levels since last fall (Exhibit 6).
Exhibit 7. MBA refinance index
As of 5/6/2026. All indices normalized to 100 at the start of the charted period.
Source: Mortgage Bankers Association, Bloomberg, Santander US Capital Markets.
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