Prepay Speeds Fall Sharply in April Reports.(Federal Home Loan Mortgage Corp., and Federal National Mortgage Association prepayment rates falls)

Prepayment rates for 30-year mortgages in Fannie Mae and Freddie Mac mortgage-backed securities fell by about 15% in April, according to Bear Stearns & Co.

The aggregate prepayment rate on 30-year Fannie Maes was a constant prepayment rate of 11.4 CPR, down 16% from 13.6 CPR in March, Bear Stearns analysts Dale Westhoff and V.S. Srinivasan reported. The aggregate speed on Freddie Mac 30-year collateral fell 15%, from 11.8 CPR in March to 10.0 CPR in April.

"Improving seasonal factors affecting turnover gave way to the drag imposed by a three-day decline in business calendar and a [9-basis-point] back-up in rates," the Bear Stearns analysts said.

The 30-year 6.0% coupons recorded the largest percentage speed decline, while declines in the 5.5% and 6.5% coupons were "slightly smaller" and those in the 4.5s and 5.0s were "noticeably smaller."

Despite the slowdown, the analysts said discount speeds, adjusted for relative coupon and seasoning, "remain well above historical norms. ... These elevated speeds are a strong indication of the continued influence of cash-out refinancing on fixed-rate prepayments."

Nevertheless, the "risks are biased" toward slower discount speeds in view of the phase of the interest rate and housing market cycles, they said.

The analysts noted that Freddie Mac speeds are still "marginally slower" than Fannie Mae speeds across most 30-year coupons and vintages.