Agency MBS Speeds Decline

Prepayment rates for 30-year mortgages in Fannie Mae and Freddie Mac mortgage-backed securities fell about 12% in February in response to a 10-basis-point rise in mortgage rates, slower seasonal housing activity, and fewer business days, according to Bear Stearns & Co."The big story, however, was in the 2006 production 30-year 6.0% and 6.5% coupons, where large declines of from 3 to 4 [constant prepayment rate] were visible," said Bear Stearns analyst Dale Westhoff. "The move higher in rates had its biggest impact on the 6.0% coupon, moving it marginally out of the refinancing window." As an example, the analyst cited the speeds of the 2006 Fannie Mae 6.0, which fell from 13.9 CPR in January to 10.0 CPR in February. The analyst said 30-year mortgage rates would have to fall by more than 50 bps, to 5.70%, to spur another "major surge" in refinancing. Bear Stearns can be found online at http://www.bearstearns.com.