Bad Weather in February Slows Pace of MBS Prepayment Activity.

Prepayment rates for agency mortgage-backed securities were mixed in the February reporting period, as speeds rose for 30-year coupons below 6.5%, but generally held steady or slowed for coupons at or above that level.

The 6.0% Fannie Mae and Freddie Mac coupons were "the focus of increased refinancing activity" in the report, rising by constant prepayment rates of about 4 CPR and 7 CPR, respectively, according to the Bear Stearns Prepayment Commentary.

"With 30-year mortgage rates consistently under 6.0% since mid-December, the stage was set for fast speeds in February, but the lid was kept on by a low day count (19 business says in the month) and the weather," said analysts Dale Westhoff and Bruce Kramer. "As a result, speeds went sideways in most issues, except the brand new ones."

The Bear Stearns analysts estimated that 88% of the "mortgage universe" is refinanceable at current mortgage rates.

Citing their prepayment models, they projected "a significant upsurge" in speeds through the early summer months as long as rates stay near current levels.

Messrs. Westhoff and Kramer, along with colleague V.S. Srinivason, also offered further comments on agency MBS disclosure in a recent issue of their Short-Term Prepayment Estimates.

Noting the disclosure recommendations of a joint study by the Department of the Treasury, the Office of Housing Enterprise Oversight, and the Securities and Exchange Commission, the analysts said the information "should result in a better understanding of prepayments in the agency sector."