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KBRA Releases Research - KBRA Credit Brief: Mortgage Rates - How Low Can They Go?

October 5, 2020 GMT

NEW YORK--(BUSINESS WIRE)--Oct 5, 2020--

Kroll Bond Rating Agency (KBRA) releases research which discusses the current and historical relationship between the 30-year PMMS and 10-year Treasury rates, the potential impact of this relationship on the direction and magnitude of future mortgage rates, and the effect that further declines in mortgage rates could have on prime jumbo and Agency CRT residential mortgage-backed security transactions. Our analysis focuses on the below areas:

  • Refinance activity will remain high as originators have room to further lower mortgage rates to spread levels more commensurate with the historical relationship between mortgage rates and the 10-year Treasury rate.
  • As demand for refinance softens over time, originators can reduce mortgage rates further to modulate volume.
  • We estimate that prepayments may increase as much as 60%-70% after a mortgage rate cut by 50 basis points from today’s rates versus expected prepayments on loans originated today if mortgage rates were to remain flat.
  • Continued periods of low rates and high prepayment speeds will help mitigate increased default risk owing to increases in non-performing loans.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.

View source version on businesswire.com:https://www.businesswire.com/news/home/20201005005704/en/

CONTACT: Ryon Aguirre, Director

+1 (646) 731-1239

ryon.aguirre@kbra.com

Fei Han, Associate

+1 (646) 731-2342

fhan@kbra.com

Jack Kahan, Senior Managing Director

+1 (646) 731-2486

jkahan@kbra.com

Business Development

Michele Patterson, Managing Director

(646) 731-2397

mpatterson@kbra.com

KEYWORD: UNITED STATES NORTH AMERICA NEW YORK

INDUSTRY KEYWORD: BANKING PROFESSIONAL SERVICES INSURANCE FINANCE

SOURCE: Kroll Bond Rating Agency

Copyright Business Wire 2020.

PUB: 10/05/2020 11:25 AM/DISC: 10/05/2020 11:25 AM

http://www.businesswire.com/news/home/20201005005704/en