Fannie/Freddie Speeds Mixed

Prepayment rates of Fannie Mae and Freddie Mac mortgage-backed securities were mixed in the December reporting period, and changes were generally small on a percentage basis, according to the Bear Stearns Prepayment CommentaryAnalysts Dale Westhoff and Bruce Kramer said nearly all changes were under 10% in 30-year coupons of 6.5% and above. "The most interesting results were in the cusp coupons (5.0% and 5.5%), where several trends in the current housing market converged to bring the only notable surprises in the December report," the analysts said. "The [Fannie Mae] 5.5%/2003 cohort, which is by far the largest single piece of the coupon stack at $268 billion outstanding, rose from 8.8 CPR in November to 10.6 CPR in December." The analysts said conventional speeds overall "remain slightly higher" than expected for several reasons, including record housing turnover and high levels of refinanced loans in pools. Bear Stearns can be found online at http://www.bearstearns.com.