Speed Watch: Fannie and Ginnie Feel Big Prepayment Spike Earlier Than Expected.(Statistical Data Included)

A big prepayment spike occurred in January for Fannie Mae and Ginnie Mae mortgage-backed securities, a month ahead of analysts' expectations.

Speeds of vintage 1999 and 2000 Fannie Mae 7.5s, 8.0s, and 8.5s surged by 100%-225% in the January report, according to the Bear Stearns Prepayment Commentary.

"While the magnitude of the numbers was very much in line with our projections, [this] spike arrives a full month earlier than expected," said analysts Dale Westhoff and Bruce Kramer.

The fact that the spike happened in the same month as the interest rate levels that triggered it is "unprecedented in the mortgage market," the analysts said.

The typical lag between an interest rate move and the prepayment levels it generates is four to eight weeks, they said, whereas the latest report reflected a lag of only two to three weeks.

The Freddie Mac MBS speeds for mid-December to mid-January showed little evidence of refinancings, suggesting that "all of this activity was captured in the last two weeks of the [Fannie Mae] reporting cycle," the analysts said.

In the Freddie Mac report, speeds of seasoned MBS slowed across the board but accelerated among 1999 and 2000 MBS vintages.