These MIAC Indexes represents the MSR price behavior of the entire 30-Year Conventional Agency MSR and 30-Year Jumbo MSR market and particular components within the marketplace have increased or declined to a greater or lesser extent. These Indexes DO NOT represent multiples indicative of the value of new production, cur rent coupon servicing rights.

Key Interest rates ____________________________________________________________________________

 

The 1 Month Libor rate moved up 26 bps through the months of February and March to finish at 4.83%. Interest rates increased drastically during the same period.The 5-Yr CMS increased by 34 bps over the 2 month period and during the same period the 10-Yr CMS scaled up by 36 bps. The yields on the 2Yr increased by 30 bps whereas the 5Yr increased by 36 bps. FNMA and GNMA 30-Yr Current Coupon Yields increased by 25 and 37 bps respectively.

Through February and March, the treasury and swap curves reversed their downward trend and have been Steepening . Both the 5 Year Swap-Libor and 10 Year Swap-Libor spreads scaled up by nearly 10 bps. The spreads between the 5 Year and 2 Year Note also increased by 6 bps. On the other hand, the FNMA Mortgage-Swap spread and the GNMA Mortgage-Swap spread decreased. The FNMA Mortgage-Swap spread flattened further by nearly 10 bps whereas the GNMA Mortgage-Swap spread has been in a neutral range by gaining less than 1 bps.

MSR OASs Flatten
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MIAC Analytics makes available Daily GSA OASs through the Daily GSA Pricing Service. Each day, MIAC Analytics will use the previous day’s current volatility of 1-Year into 10-Year swaption volatility as a proxy for mortgage volatility.

The graph below illustrates the OASs computed in MIAC Analytics from the actual GSA prices for nine of the largest GSAs: Conventional 15-Year 5.0% Issue Year 2002, Conventional 15-Year 5.0% Issue Year 2003, Conventional 15-Year 5.5% Issue Year 2002, Conventional 30-Year 5.0% Issue Year 2005, Conventional 30-Year 5.0% Issue Year 2003, Conventional 15-Year 4.5% Issue Year 2005, Conventional 30-Year 5.5% Issue Year 2003, Conventional 30-year 6.0% Issue Year 2002, Conventional 30-year 6.0% Issue Year 2003, GNMA 30-Year 5.5% Issue Year 2003, and GNMA 30-Year 6.0% Issue Year 2002. The graph displays the monthly OASs from 6/1/2005 to 1/31/2006.

GSA OASs followed a Flattening trend through the month of December, but since then have appeared to stay within a certain range. In January, the OASs for these benchmark assets tightened across the majority of asset classes.

Servicing.com has provided daily IO/PO pricing on a portfolio of Trust IOs for several years. As a result, we can provide a comparison of historical Trust IO OASs with the same interest rate model, volatility inputs and OAS cash flow model as the historical GSA OASs. One can see from the table above that Trust IO OASs don’t appear to be well correlated to OAS behavior of the GSAs. This behavior does not support the use of Trust IO OASs as benchmark OASs for the MSR marketplace.

In the table above, the OAS durations or measurements of the anticipated MSR price sensitivity
were computed with a constant OAS.

MSR convexities have continued moving further into their typical negative territory for most Generic Servicing Assets, as rates persistently climb. When convexity is positive, MSR prices will increase more for an upward rate shift, than they will decrease for a downward rate shift. When convexity is negative, MSR prices will decrease more for a downward rate shift than they will increase for an upward rate shift.

 

BMA Prepay Speeds Retrace
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The following tables reflect BMA historical dealer median prepayment forecasts.

After a noticeable pick-up in BMA dealer consensus prepayment speeds observed in the month of January, speeds have generally slowed down a little bit through the month of March and are still well below their historical highs. The 2005 pools retraced for the major part except new 6.0 pass-through FNMA 15 yr pools. The 2004 pools increased across the board with the exception of 4.5 and 5.0 pass-through FNMA 15 yr pools. The more seasoned pool have had a muted reaction with the majority of the FNMA pools prepayments being steady while the GNMA pools showing prepayment increases.

On 8/15/2005 the Bond Market Association released a revised listing of mortgage assets and their prepayment speeds to reflect the current mortgage market at the time. These new asset classes do not have historical speeds prior to that date.

 

MedianPSAForecast
Red Indicates the highest forecasts on record and yellow the second highest.