Prepayment rates for Fannie Mae mortgage-backed securities rose sharply in March as the speed of the massive 5.5% 2003 coupon surged 48%, according to the Bear Stearns Prepayment Commentary.Bear Stearns analysts Dale Westhoff and Bruce Kramer said the speeds of most coupons jumped 25%-30%. The report reflects "two important realities in the current prepayment landscape," they said, namely "ample capacity in the mortgage pipeline" and the "significant drop" in mortgage rates after the March 5 employment report. However, they went on to note the more recent back-up in interest rates. "The sell-off has pushed the mortgage rate back to where it was at the beginning of the year (5.90%), reducing MBS market refinancing exposure from a high of 70% in March to just 37% today," the analysts said. "Similarly, the average borrower refinancing incentive has dropped from a high of 80 basis points the week ending March 12 to just 30 basis points today." Bear Stearns can be found online at http://www.bearstearns.com.

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