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42 RMBS PREPAYS APPROACHING POST-CRISIS LOW According to Fitch Ratings' latest quarterly index, prepayment rates among U.S. residential mortgage-backed securities (RMBS) have declined to the lowest levels of the post-crisis era. Fitch Ratings' director Sean Nelson attributed the decline in prepayment rates to higher interest rates and fewer distressed liquidations. "Mortgage rates are up roughly 100 basis points from their historic lows in late 2012," Nelson said. "Borrowers not taking advantage of historically low rates may be unable to refinance their mortgages due to credit issues or lack of equity." e conditional prepayment rate (CPR) for prime jumbo loans fells to 14.7 percent, while the rate for Alt-A loans fell to 10.3 percent. e CPR for subprime loans fell to 8.8 percent in the first quarter of 2014. "Prime CPR is at the lowest level since early 2009, while Alt-A and subprime CPR are at or near all-time lows," Fitch said in a release. CPR is made up of both voluntary and involuntary prepayments. Voluntary prepays are traditionally 90 percent of the all-in CPR figure. Fitch found that since the crash of the housing market, involuntary prepays, or liquidations of distressed loans, have made up an increasing share. Since 2009, the majority of non-prime CPR has been involuntary liquidations. "Both voluntary and involuntary prepayment rates are likely to decline further if mortgage rates continue to rise and liquidation rates continue to fall as expected," Nelson said. Fitch also announced that it has launched its first U.S. residential mortgage servicer snapshot. e report will contain key information for active RMBS servicers, including a description of all Fitch-rated servicers, current servicer ratings, portfolio size per servicer, and analyst contact detail and links to full RMBS servicer reports. e company said, "Notably, the snapshot will also provide the names of RMBS servicers currently assigned to transactions in an easy- to-use CUSIP reference format. While the majority of active RMBS bonds are included in this published list, Fitch expects to continue to expand coverage." LEADING ECONOMIC INDEX GAINS MOMENTUM IN MARCH e Conference Board's Leading Economic Index (LEI) rose for the third straight month in March. e LEI increased 0.8 percent that month to 100.9, outpacing increases of 0.2 percent in January and 0.5 percent in February. Ten factors are associated with the score, including average weekly hours, manufacturing, average weekly initial claims for unemployment insurance, building permits, new private housing units, and average consumer expectations for business conditions. e group provides composite averages based on the indicators to reveal turning-point patterns in economic data rather than relying on volatile independent component data. "After a winter pause, the leading indicators are gaining momentum and economic growth is gaining traction. While the improvements were broad-based, labor market indicators and the interest rate spread largely drove the March increase, offsetting the negative contribution from building permits. And, for the first time in many months, the consumer outlook is much less negative," said Ataman Ozyildirim, an economist at the Conference Board. e outlook in the analytic system points more to a peak than a trough in coming months. "e March increase in the LEI suggests accelerated growth for the remainder of the spring and the summer," added Ken Goldstein, an economist at the Conference Board. "e economy is rebounding from widespread inclement weather and the strengthening in the labor market is beginning to have a positive impact on growth. "Overall, this is an optimistic report, but the focus will continue to be on whether improve- ments in the labor market can be sustained, fueling stronger economic performance over the next few months," he continued. Another two indexes were also updated: the Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.2 percent in March to 108.3 following a 0.4 percent increase in February and a 0.1 percent decline in January. Also, the Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.6 percent in March to 123 following a 0.3 percent increase in February and a 0.6 percent increase in January. DS NEWS DIGITAL AVAILABLE NOW DIGITAL.DSNEWS.COM From the latest industry news and trends to in-depth interviews with leading servicing executives and a growing catalog of previous DS News issues, DS News Digital is now free for a limited time as your ultimate on- the-go resource for everything impacting the mortgage default servicing industry.

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