In a recent post[1], we discussed the various factors behind the elevated pace of prepayments in Ginnie Mae securitized pools relative to those in conventional pools. A key driver of the difference in speeds is the different incentives facing Ginnie Mae program servicers regarding loan buyouts on one hand and those facing the GSE’s on the other. In the first case, the economics of the transaction are often favorable for servicers with cash available to purchase loans out of pools while the GSE’s take a more balanced view of the interests of servicers and investors.

The key regulation driving GSE behavior in this regard is the September 30, 2020 statements by the Enterprises extending the timeframe for delinquent loan buyouts from four consecutive months to twenty four consecutive months[2]. While forbearance was not explicitly mentioned in these announcements, there is clearly a connection between this timeframe and that of the duration of the forbearance programs. For conventional loans that entered a plan prior to February 28 2021, borrowers have a maximum 18 months of forbearance available to them[3]. Since the biggest share of loans in forbearance took place in Q2 2020, that 18 month period is running out for many. As borrowers work with their servicers to consider their options, loan buyouts should start to pick up in coming months as distressed borrowers pursue loan modifications or enter into foreclosure proceedings. In addition, distressed borrowers with equity in their homes may choose to sell their properties, leading to a pickup in voluntary prepayments.

​Over the past six months, prepayment speeds of Ginnie Mae securities have notably widened against those of the GSEs.

Quoting Recursion Data, Debtwire reported that Non-Bank EBOs fell back in February, even though the level is still multiple times greater than the average recorded across most months in 2020.
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The analysis was performed using Recursion’s flagship product: Cohort Analyzer.