October Slowdown May Signal Turning Point.(reports in real estate industry)

Prepayment rates on 30-year fixed-rate mortgages underlying agency mortgage-backed securities fell 5% in October, possibly ushering in a new phase for discount speeds, according to Bear Stearns & Co.

The October slowdown stemmed largely from the annual autumn/winter slowdown in housing turnover, but other factors that have held sway are now poised for a reversal, Bear Stearns analyst Steven Bergantino said.

The overall speed of 30-year Fannie Mae MBS collateral stood at 18.4 CPR in October, down 1 CPR from September's level, while the overall speed on comparable Freddie Mac collateral stood at 16.4 CPR, also down 1 CPR, Mr. Bergantino said.

The slowdown was "fairly uniform across the coupon stack" except for Fannie 6s, whose speeds fell by just 1%, Mr. Bergantino reported.

Meanwhile, the overall speed on 30-year Ginnie Mae collateral fell more sharply than for conventional MBS, sliding 9% in October to 23.1 CPR.

Mr. Bergantino said October will likely mark the end of a two-year period of "remarkably fast" discount prepayments because many factors that kept them at high levels have turned negative.

For example, the 30-year mortgage rate had risen to 6.44%, "lowering the average rate incentive of fixed-rate borrowers to minus-42 basis points, the most negative it has been since late 2000," he said.