MBS Speeds Surge; Freddies Faster Than Fannies

Prepayment rates for agency mortgage-backed securities shot up for new 30-year coupons at and below 6.5% in April, with Freddie Mac MBS speeds outpacing those of Fannie Mae, according to the Bear Stearns Prepayment Commentary.Among Fannie Maes, speeds for the 2002 vintage 5.5s, 6.0s, and 6.5s increased by constant prepayment rates of 9-12 CPR, reaching 20, 50, and 63 CPR, respectively, analysts Dale Westhoff and Bruce Kramer reported. For comparable Freddie Macs, speeds were 3-6 CPR faster. "We trace this difference to two sources: 1) the heavy concentration of Wells Fargo loans (they tend to prepay faster because of large loan sizes); 2) the shorter refinancing aging ramp associated with ABN Amro pools," the analysts said. Noting the recent return of mortgage rates to near their 40-year lows, the Bear Stearns analysts said they expect about $2.3 trillion of agency fixed-rate pools -- which they estimated to be about 80% of the market -- to be exposed to a refinancing incentive of at least 40 basis points. Bear Stearns can be found online at http://www.bearstearns.com.