Prepayment speeds are expected to increase around 10% or more in August as the higher day count – 23 days versus 20 days in July – partially offsets a modest decline on average in July refinancing activity. JPMorgan Securities analysts estimate paydowns will increase to approximately $40 billion from $34 billion in July.
At this time, speeds in September are currently projected to decline around 10% to15% with the number of collection days (20) once again being a factor. However, potentially limiting the decline is a pickup in borrowing activity in response to the latest rally.
JPMorgan analysts, in explaining their projection for increased speeds for the September report, stated that the seasonal factor is usually 5% higher for August compared to July and there are three more collection days. But they noted that the Mortgage Bankers Association Refinancing Index – using five-week lags – has dropped 7%. Overall, JPMorgan said that they expect paydowns to be up 15% to just under $40 billion.
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