COVID-19 and the markets reaction to it are unprecedented. For the past three weeks, the CMM102 was as low as 2.0 and as high as 3.5. Clients have observed some issues with our primary/secondary spread model and projected primary mortgage rates, which we have been working to improve together with other issues, such as media effect.

With regard to prepayment considerations due to COVID-19, discussions and observances continue with the expectation that we will learn more over the coming days. We do expect to assume a lower HPA, higher unemployment, longer persistence of higher P/S spreads, and likely some temporary turnover slowdown on top of what is driven by HPA and unemployment due to the expected weaker “home shopping” season.

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