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Prepayment Speeds Fall Less Rapidly than Expected in September.
Prepayment rates slowed "far less than expected" for seasoned 6.0%-7.0% agency mortgage-backed securities in the September reporting period, according to the Bear Stearns Prepayment Commentary.
Analysts Dale Westhoff and Bruce Kramer said the latest speeds "suggest that the processing delay between new and seasoned MBS expanded significantly during the final leg of the refinancing wave."
The slowdown in constant prepayment rates for seasoned 6.0%-7.0% coupons ranged from 5% to 20%, the analysts said, compared with a 35%-45% CPR decline for new Fannie Mae 5.5s and 6.0s.
"The contradiction between leading indicators and actual reported speeds indicates that the sharp sell-off in June sparked a massive rush by borrowers to lock in rates in late June and early July, a rush that was even larger than we had anticipated," the analysts said.
They predicted that seasoned high coupons would "play catch-up" to expected speed declines over the next two reports.
The Ginnie Mae sector was affected in much the same way as the conventional 30-year market by the presumed pipeline delays, the analysts said. The slowdown among higher Ginnie Mae coupons were, in percentage terms, "almost identical" to those for Fannie Maes, they said.
They noted, however, that new Ginnie Mae 7.0%-7.5% issues continued to pay about 4.3 CPR faster than comparable Fannie Maes.
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Source: HighBeam Research, Prepayment Speeds Fall Less Rapidly than Expected in September.