Housing Turnover Continues to Boost Speeds.

Prepayment rates on 30-year fixed-rate mortgages collateralizing agency mortgage-backed securities fell slightly in June, with stronger housing turnover offsetting some of the decline in refinancing, according to Bear, Stearns & Co.

Overall speeds on 30-year Fannie Mae collateral decreased by a constant prepayment rate of only 0.2 CPR (from 12.6 CPR to 12.4 CPR) and 30-year Freddie Mac speeds fell by only 0.1 CPR (from 11.2 to 11.1), analysts Dale Westhoff and V.S. Srinivasan reported.

"Looking across coupons, the deep discount 4.5% and 5.0% coupons posted moderate increases in prepayments while speeds on higher coupons declined marginally," the analysts said.

"Given the selloff in rates and seasonal changes from May to June we would have expected a small decline in speeds across the coupon spectrum," they said. "However, speeds on [Fannie] 4.5s and 5.0s increased by 0.6 and 0.3 CPR, respectively, suggesting strong housing turnover activity."

Speeds on 30-year Ginnie Mae mortgages declined by 5%, from 17.0 CPR in May to 16.1 CPR in June. Speeds on 30-year Freddie Mac mortgage collateral continued to be slower than Fannie Mae speeds for most coupons and vintages, but the differences were "less pronounced as we move down the coupon stack," the analysts said. And in the 15-year sector, there was "hardly any difference" in speeds.

"Most of the [Fannie-Freddie] speed differential can be attributed to cash-out refinancing, which is less likely to occur in the 15-year sector and in deep discounts," they said.

In other prepayment-related news, the Bear Stearns analysts reported in the July issue of Short-Term Prepayment Estimates that the ...