When NLY disposes 7.3 billion of mbs during the third quarter, do they incur a premium cost due to the early re-payment of principle?
If so, say an average of 3.5% premium times 7.3 billion equals 255 million of premium. That is 113 million more then the 142 million of 'gains' that NLY reported off of the disposals.
If the 7.3 billion of mbs would have a prepayment experience like the rest of their portfolio, then I estimate they would have incured an additional 13 million of prepayment expense for the quarter.
The bottom line from my numbers is NLY had an additional 100 million of premium expense becuase of the disposals.