Prepay Speeds on Freddie Mac's MBS Exceed Those of Fannie Mae.

Prepayment rates for agency mortgage-backed securities rose substantially in April for new 30-year coupons in the 5.5%-6.5% range, and Freddie Mac speeds were consistently faster than those of Fannie Mae among such coupons.

Among Fannie Maes, speeds for the 2002 vintage 5.5s, 6.0s and 6.5s increased by constant prepayment rates of 9-12 CPR, reaching 20, 50 and 63 CPR, respectively, according to the Bear Stearns Prepayment Commentary. For comparable Freddie Macs, speeds were 3-6 CPR faster.

"We trace this difference to two sources: 1) the heavy concentration of Wells Fargo loans (they tend to prepay faster because of large loan sizes); 2) the shorter refinancing aging ramp associated with ABN Amro pools," analysts Dale Westhoff and Bruce Kramer said.

Noting the return of mortgage rates to near their 40-year lows, the Bear Stearns analysts said they expected about $2.3 trillion of agency fixed-rate pools to be exposed to a refinancing incentive of at least 40 basis points.

"The percentage exposure is not at record levels because so many high-(weighted average coupon) mortgages have been recycled into the mortgage market in the form of new 5.0% and 5.5% pools," they said.

Earlier this year, a 5.60% 30-year mortgage rate would have exposed more than 90% of the fixed-rate market to a hefty refi incentive, but the recycling of high-WAC mortgages has probably reduced that percentage to about 80%, the analysts estimated.

In the March reporting period, agency MBS speeds were higher across the board, although the "focus of the refinancing juggernaut" remained at and below the 6.5% coupons, according to Bear Stearns.