• HOME
  • solutions
    • RECURSION ANALYZERS
    • Mortgage Company Data
    • Recursion DataCloud
    • Customized Solutions
  • BLOG
  • CLIENT LOGIN
    • Recursion Analyzers
  • ABOUT US
    • OVERVIEW
    • OUR TEAM
    • News & Events >
      • Recursion In News
      • Recursion Data Citations
  • CONTACT
RECURSION CO
  • HOME
  • solutions
    • RECURSION ANALYZERS
    • Mortgage Company Data
    • Recursion DataCloud
    • Customized Solutions
  • BLOG
  • CLIENT LOGIN
    • Recursion Analyzers
  • ABOUT US
    • OVERVIEW
    • OUR TEAM
    • News & Events >
      • Recursion In News
      • Recursion Data Citations
  • CONTACT
BLOG

The Impact on Prepayment Speeds of Fannie Mae Earlier than Expected Buyouts

4/18/2022

 
In an earlier post, we discussed the use of trial modifications as a leading indicator of buyouts, as loans in these programs must experience three months of successful payments prior to being eligible for a permanent mod[1]. On January 25, Fannie Mae announced that they had purchased certain loans out of pools prior to the completion of the necessary trial payments.[2] Then, on March 25, Fannie published a list of these securities, allowing us to quantify the impact of this event on the performance of their pools[3].

The spreadsheet attached to the March announcement contains over 17,800 entries dating back to February 2021 and states that the total unpaid balance bought out early amounted to over $4.5 billion.
​
The point of this post is to assess the magnitude of this activity on Fannie Mae’s prepayment speeds. To address this question, we imported the data in the file released by Fannie Mae into our Recursion Pool Analyzer.
​
As a first step, we look at the impact of these purchases on CDR’s as the activity was clearly involuntary.
Picture
The impact on CDR’s of the early buyouts was clearly material, with the maximum impact felt in January this year when the activity resulted in an unintended boost in involuntary prepays of 0.36 to 0.76. If those loans were not bought out in that month, they will either be bought out later or prepay at a much later date. Fannie Mae provided its estimate of the “Financial Impact” of these early buyouts, generally equivalent to 1-3 months of P&I of the loans. However, there are some with more than 3 months of impact. The early buyout changes the timing and distribution of CDR. Calculating this is a daunting task since there are many reasons why a loan might be bought out of a pool. In a supporting reference document, Fannie Mae provides a taxonomy of possibilities in calculating the financial impact of the EBO’s[4]. There are four categories presented. These are:
 
  1. Resolved: Delinquent loans that were removed from the security early but have since experienced an event that would have necessitated removal from the security (e.g., the loan has since successfully completed a modification trial, the loan paid in full, etc.).
  2. Unresolved – Mod Trial: Delinquent loans that were removed from the security early but are currently performing in modification trials and on track to complete the trial payments in 1–3 months.
  3. Unresolved – Not Performing: Delinquent loans that were removed from the security early, did not receive a modification, are currently not performing and likely moving to an event that would have necessitated removal from the pool (e.g., modification, referral to foreclosure, twenty-four months delinquent).
  4. Unresolved – Performing: Delinquent loans that were removed from the pool early and are now currently performing without a modification (e.g., successful payment deferral).
 
We would expect the magnitude of the impact on CPR’s to be smaller than that on CDR’s given that the much larger number of voluntary prepays were unaffected by the early buyouts.
Picture
In fact, this is the case with the maximum impact on Fannie’s CPR being 0.3, also in January.
​
The main take-away is that no matter how sophisticated your model, the results are only as good as the quality of the data.

[1] https://www.recursionco.com/blog/agency-based-metrics-for-assessing-the-resolution-of-mortgage-forbearance-and-delinquencies-part-ii-the-gses
[2] https://capitalmarkets.fanniemae.com/mortgage-backed-securities/certain-sf-mbs-pools-earlier-expected-trial-modification-related-loan-buyouts
[3] https://capitalmarkets.fanniemae.com/mortgage-backed-securities/single-family-mbs/list-earlier-expected-modification-trial-buyouts
[4] https://capitalmarkets.fanniemae.com/media/22266/display
Recursion is a preeminent provider of data and analytics in the mortgage industry.
Please contact us if you have any questions about the underlying data referenced in this article.

    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    May 2019
    March 2019
    February 2019

    Tags

    All
    Affordability
    ARM
    Bank\Nonbank
    Borrower Assistant Plan
    Cash Window
    Climate Change
    CMBS
    CMO
    Conforming Loan
    Conventional Loan
    COVID 19
    CPR\CDR\CRR\CCR
    Credit Score\DTI\LTV
    CRT\CAS\STACR
    Delinquency
    Early Buyout
    Early Payment Default
    ESG
    ET Pools
    Fannie Mae
    Fed
    FHA
    FHFA
    Forbearance
    Foreclosure
    Foreign Investor
    Freddie Mac
    Ginnie Mae
    Green Loans
    HECM
    HELOC
    HMDA
    HUD
    LMI
    Manufactured Housing
    Modified Loans
    MSR
    Multifamily
    Occupancy Type\NOO
    Partial Claim
    Payoff
    PIW
    Prepayment
    Purchase Loans
    Recursion In News
    Refi Loans
    Reperforming
    RG Pools
    Rural Housing
    Single Family
    Special Eligibility Program
    TBA Market
    TIC
    TPO
    UMBS
    US Treasury
    VA

RECURSION

SOLUTIONS ​
Recursion Analyzers
​
Mortgage Company Data
Recursion DataCloud
Customized Solutions


ABOUT US  ​
Overview
​Our team
CLIENT LOGIN   ​
Recursion Analyzers

CONTACT

224 West 30th St., Suite 303, New York, NY 10001
Contact Us

Picture
Copyright © 2022 Recursion, Co. All rights reserved.​
  • HOME
  • solutions
    • RECURSION ANALYZERS
    • Mortgage Company Data
    • Recursion DataCloud
    • Customized Solutions
  • BLOG
  • CLIENT LOGIN
    • Recursion Analyzers
  • ABOUT US
    • OVERVIEW
    • OUR TEAM
    • News & Events >
      • Recursion In News
      • Recursion Data Citations
  • CONTACT