Fannie Prepay Speeds Fall to a Five-Year Low.(Federal National Mortgage Association)

The overall prepayment rate for 30-year mortgages securitized by Fannie Mae fell about 10% in December to its lowest level in five years, according to Bear Stearns & Co.

The aggregate speed on 30-year Fannie Maes was a constant prepayment rate of 13.8 CPR, down from 15.4 CPR in November, marking the first time it has been below 15 CPR since January 2001, said Bear Stearns analyst Dale Westhoff.

The analyst commented that the 10% Fannie Mae speed decline was small in view of the 28-basis-point rise in mortgage rates during the same period.

"It was somewhat surprising that speeds on premium coupons, particularly [Fannie Maes], did not show a higher sensitivity to the sell-off in rates," Mr. Westhoff said.

The aggregate prepayment rate on Freddie Mac 30-year collateral declined 13%, from 14 CPR in November to 12.1 CPR in December. Despite the greater falloff in speeds, Freddie Mac collateral continued to prepay slower than its counterparts in Fannie Mae mortgage-backed securities "across virtually all coupons and vintages," the analyst said.

Meanwhile, aggregate speeds for 30-year Ginnie Mae collateral fell by 10%, from 21.4 CPR in November to 19.3 CPR in December. Mr. Westhoff said the speed decline for Ginnie Maes was uniformly distributed across the coupon stack.

For agency hybrids, speed declines were "much more muted" than for MBS with fixed-rate collateral, "highlighting the extension protection" offered by the hybrid sector, the analyst said.