Housing Turnover Fuels Rise in Prepayments.

Prepayment rates on 30-year fixed-rate mortgages in Fannie Mae and Freddie Mac mortgage-backed securities increased by a constant prepayment rate of 1.2 in May, or 11%, according to the Bear Stearns Prepayment Commentary.

Overall speeds on 30-year Fannie Mae collateral came in at 12.6 CPR for the month, while speeds for comparable Freddie Mac mortgages averaged 11.2 CPR, Bear Stearns senior managing directors V.S. Srinivasan and Dale Westhoff said in the report.

The increase in prepayment rates was "uniformly distributed" across coupons, the Bear Stearns analysts reported.

"A seasonal increase in housing turnover activity and a two-day increase in the business calendar more than offset the 12-bp increase in mortgage rates," the analysts said.

Freddie Mac 30-year speeds rose a bit more than those of corresponding Fannie Maes, but were still "marginally slower" for most vintages and coupons, they reported.

For example, prepayments on the benchmark 2003 Freddie 5.0s stood at 10.2 CPR, up 1.4 CPR and not far below the 10.6 CPR recorded by the 2003 Fannie 5.0s.

"The difference in prepayments across the GSEs is generally more pronounced in cuspy coupons and converge for deep discounts," the Bear Stearns analysts said.