Some Agency MBS Speeds Rise Again

Prepayment rates rose in the December reporting period for Fannie Mae and Ginnie Mae mortgage-backed securities and were mixed for Freddie Mac MBS, according to the Bear Stearns Prepayment Commentary, contrary to the analysts' expectations that speeds had peaked in November.Speeds of 30-year Fannie Mae 6.0%, 6.5%, and 7.0% coupons in the 2001 vintage rose by constant prepayment rates of about 3 CPR, and most seasoned Fannie Mae vintages held steady or sped up modestly, said analysts Dale Westhoff and Bruce Kramer. For Freddie Mac MBS, speeds were "much more muted." The Bear Stearns analysts said they were surprised by the rise in Fannie Mae speeds, attributing it in part to the two additional business days in December (compared with November's total) and the rise and fall of interest rates in October and November. "We had expected the zigzag rate path to smooth out the prepayment profile, especially since it was occurring during the holiday season when transactions are typically slower to close," the analysts said. Bear Stearns can be found online at http://www.bearstearns.com.