Agency MBS Speeds Decline

Prepayment rates for 30-year mortgages in Fannie Mae and Freddie Mac mortgage-backed securities fell modestly in January, driven by a seasonal decline in turnover that offset a 15-basis-point rally in mortgage rates, according to the Bear Stearns Prepayment Commentary.The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 11.5 CPR, down from 12.0 CPR in December, compared with 10.2 CPR for comparable Freddie Macs, down from 11.1 CPR in December, said Bear Stearns analysts Dale Westhoff and V.S. Srinivasan. "The biggest surprise in today's numbers was the decline in prepayments in higher coupons in the face of a significant rally in mortgage rates," the analysts said, noting that the rally exposed mainly newly originated mortgages backing 6.0% and 6.5% coupons. "These borrowers have seen little or no home price appreciation, reducing the cash-out incentive that has been such a critical component to the prepayment response in recent years." Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral declined by 9% in January. Bear Stearns can be found online at http://www.bearstearns.com.