Speeds Rise Despite Mixed Refinancing Picture.

Prepayment rates for 30-year Fannie Mae and Freddie Mac mortgage-backed securities rose slightly in May, spurred by seasonal increases in turnover in the face of mixed refinancing activity, according to Bear Stearns.

Fannie Mae 30-year MBS speeds increased from a constant prepayment rate of 18.7 CPR to 19.2 CPR overall, while comparable Freddie Mac speeds remained nearly unchanged, said Bear Stearns analyst Dale Westhoff.

Speeds of coupons at and below 5.5% rose by 0.5-1.0 CPR, while premium speeds were generally slower, Mr. Westhoff reported. The pattern of prepayments on 15-year MBS collateral was similar.

However, speeds of agency hybrids rose across the board, "reflecting the greater importance of turnover as a source of hybrid prepayments," he said.

Meanwhile, Ginnie Maes saw "larger, more consistent" speed-ups across the coupon stack, resulting in a widening of the Ginnie Mae-conventional prepayment gap, the Bear Stearns analyst reported.

Mr. Westhoff noted that the conforming 30-year mortgage rate had dropped more than 40 basis points from its recent peak of 6.10% in April.

"This has increased the proportion of fixed-rate borrowers facing refinancing opportunities of 40 bps or more from just 21% at the beginning of April to roughly 34% at the current 30-year mortgage rate of 5.68%," he said.