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The speeds of 30-year Fannie and Freddie MBS increased 13% in December, as aggregate speeds stood at 9.0 CPR forFannie Maes and 8.4 CPR for comparable Freddie Macs.That was up from 7.7 CPR and 7.6 CPR, respectively, in November, according to the Bear Stearns Prepayment Commentary.Bear Stearns senior managing director V.S. Srinivasan said the company believes the December prepayment report"reflects some of the early response" to the rally in mortgage rates that began in late November."Given the low level of mortgage origination activity, the lag between changes in rates and the ensuing prepaymentresponse has likely decreased," he said.Prepayments on 15-year Fannie Mae and Freddie Mac collateral rose by 9% in December, with Fannie speeds climbingfrom 8.3 CPR to 9.2 CPR and Freddie speeds increasing from 8.1 CPR to 8.7 CPR.Ginnie Mae speeds rose 9%, with the biggest percentage increase coming in the 6.0% coupons of 2007, Bear Stearnsreported. The speeds jumped from 5.5 CPR in November to 11.7 CPR in December and are running nearly 2 CPR fasterthan comparable Fannies and Freddies."While some of this increase can be attributed to the recent rally in rates, we believe that servicer buyoutactivity probably contributed significantly as well," Mr. Srinivasan said.The Bear Stearns analyst predicted that the January prepayment report would show a 10% rise in speeds in responseto several factors: the full effect of the rally in rates, a one-day increase in the business calendar, and a likelyrush in refinancings as originators try to complete as many as possible before a change in the delivery fee structurefor the government-sponsored enterprises takes effect in March."However, given today's extraordinary housing conditions and structural changes to the underwriting process,the refinance response to a rally in rates is likely to be significantly less than suggested by recent history,"Mr. Srinivasan said. "We continue to believe that the refinancing curve in 2008 will be flatter than any timesince the mid-1990s."