Future of OTM Speeds & The New Low Loan Balance Playbook

In this week’s Convexity Pulse, Kirill Krylov and Steven Scheerer discuss why agency MBS fundamentals remain more constructive than recent volatility would suggest, despite geopolitical uncertainty and seasonal supply pressures. They examine the growing role of non-rate-driven borrower behavior, including how retirement funding needs, rising housing costs, and increasing homeowner liquidity demands could reshape prepayment patterns in seasoned discount collateral and certain segments of Ginnie Mae MBS. The episode also explores Freddie Mac’s overhaul of low-loan-balance pooling practices and what the changes reveal about the evolution of specified-pool investing, prepayment modeling, and collateral differentiation in today’s mortgage market.