Prepayment rates of Fannie Mae and Freddie Mac mortgage-backed securities slowed an average of 20% across the board in the November reporting period, according to the Bear Stearns Prepayment CommentaryAnalysts Dale Westhoff and Bruce Kramer took special note of big declines in the speeds of coupons above 6%. "Given that this sector is still theoretically refinanceable, there has been considerable uncertainty surrounding the timing and magnitude of the slowdown in this sector," the analysts said. "However, 16 months of continuous, heavy refinancing activity has finally produced a classic burnout response from the remaining borrowers in these pools." The analysts also pointed to the fact that the speeds of Fannie and Freddie MBS have "fully converged across the coupon stack" after an extended period in which Freddie Mac speeds were markedly faster than those of Fannie Mae MBS. In the Ginnie Mae sector, the speed declines were not as steep, in part because of servicer buyouts. Mr. Westhoff and Mr. Kramer said another likely reason is the longer processing time for Federal Housing Administration and Department of Veterans Affairs loans with smaller balances. Bear Stearns can be found online at http://www.bearstearns.com.

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