Bear: MBS Speeds Slow Less Than Expected

Prepayment rates slowed "far less than expected" for seasoned 6.0%-7.0% agency mortgage-backed securities in the September reporting period, according to the Bear Stearns Prepayment CommentaryAnalysts Dale Westhoff and Bruce Kramer said the latest speeds "suggest that the processing delay between new and seasoned MBS expanded significantly during the final leg of the refinancing wave." The slowdown in constant prepayment rates for seasoned 6.0%-7.0% coupons ranged from 5% to 20%, the analysts said, compared with a 35%-45% CPR decline for new Fannie Mae 5.5s and 6.0s. "The contradiction between leading indicators and actual reported speeds indicates that the sharp sell-off in June sparked a massive rush by borrowers to lock in rates in late June and early July, a rush that was even larger than we had anticipated," the analysts said. They predicted that seasoned high coupons would "play catch-up" to expected speed declines over the next two reports. Bear Stearns can be found online at http://www.bearstearns.com.