Refinancings high on US mortgages
Prime mortgage borrowers in U.S. RMBS pools issued since the start of 2010 are still prepaying at rapid rates, reflecting the refinance incentives driven by low mortgage rates, according to Fitch Ratings.
Historically, high refinance activity has left poorer quality borrowers in mortgage pools, which in turn has increased performance volatility. For recent RMBS, however, the credit implications have been modest to date due to the high overall credit quality of the original pools.
Last month, prime RMBS mortgage pools issued since 2010 reported an average conditional prepayment rate (CPR) of approximately 42%. This is more than twice as fast as the rates of outstanding prime loans securitized in earlier vintages. The elevated prepayment rates have resulted in rapid declines to the mortgage pool balances. In fact, only 12% of the original balance of the sole transaction issued in 2010 remains outstanding today. Additionally, pool balances for both transactions issued in 2011 have paid down to less than half their initial amounts.