MBS Speeds Mixed in February

Prepayment rates for agency mortgage-backed securities rose for 30-year coupons below 6.5% in the February reporting period, but speeds generally held steady or slowed for coupons at and above that level, according to the Bear Stearns Prepayment Commentary.The 6.0% Fannie Mae and Freddie Mac coupons were "the focus of increased refinancing activity" in the report, rising by constant prepayment rates of about 4 CPR and 7 CPR, respectively, said analysts Dale Westhoff and Bruce Kramer. "With 30-year mortgage rates consistently under 6.0% since mid-December, the stage was set for fast speeds in February, but the lid was kept on by a low day count (19 business days in the month) and the weather," the analysts said. "As a result, speeds went sideways in most issues except the brand new ones." Messrs. Westhoff and Kramer estimated that 88% of the "mortgage universe" is refinanceable at current mortgage rates. Citing their prepayment models, they projected "a significant upsurge" in speeds through the early summer months as long as rates stay near current levels. Bear Stearns can be found online at http://www.bearstearns.com.