Ginnie Mae Speeds Not Slowing as Quickly as Fannie's and Freddie's.(Federal Home Loan Mortgage Corp.)(Federal National Mortgage Association)

Prepayment rates for Fannie Mae and Freddie Mac mortgage-backed securities fell across the board in the October reporting period, but Ginnie Mae MBS speeds "threw the mortgage market a fast curve," according to the Bear Stearns Prepayment Commentary.

Analysts Dale Westhoff and Bruce Kramer said speeds for several lower-coupon Ginnie Mae cohorts defied expectations by slowing less than expected or actually increasing.

Several Ginnie Mae vintages in the 5.0%-6.0% range paid faster in October than in September. For example, the speed of 2002 Ginnie 5.5s accelerated from a constant prepayment rate of 18.2 CPR in September to 21.0 CPR in October, while comparable Fannie Maes slowed from 25.9 CPR to 19.3 CPR, the analysts reported.

"We believe this is another example of servicer buyouts muddying the (Ginnie Mae) prepayment waters," Messrs. Westhoff and Kramer said. "... If the retreat from the high mortgage rates in August gave some cusp borrowers a second chance to refinance, it gave a similar opportunity for large servicers to extract value from their portfolios."

Meanwhile, the biggest slowdowns (more than 10 CPR) among Fannie Mae and Freddie Mac 30-year MBS coupons came in moderate and fully seasoned 6.0s and 6.5s.

"In retrospect, it is clear that the record refinancing volumes reached during the peak of the 2003 refinancing wave delayed our expected slowdown in prepayments by at least one month (particularly in seasoned high coupons)," the Bear Stearns analysts said. "Nevertheless, next month we expect prepayments to register another large decline as the refinancing pipeline continues to drain and the number of business days drops from 22 in October to 18 in November."

In another recent publication, Bear Stearns analysts talked about pipeline lags and why ...