Prepayment Speeds Accelerate after Lagging Forecast in September.

Prepayment rates for agency mortgage-backed securities shot up across the board in October, playing catch-up to analysts' forecasts after the slower-than-expected speeds recorded in September.

The numbers "substantiate the magnitude and breadth of the current refinancing wave," the Bear Stearns Prepayment Commentary reported.

Speeds of Fannie Mae and Freddie Mac 6.0%-7.0% coupons rose by constant prepayment rates of 9-15 CPR, analysts Dale Westhoff and Bruce Kramer said. New to moderately seasoned 30-year coupons in the 6.0%-7.0% range were paying from about 40 CPR to 65+ CPR, increasing from 17% to 50%, they said.

"Overall, there was little evidence of burnout in the numbers in coupons below 8%, with seasoned 7.0s (pools seasoned at least 30 months) paying an average of 63 CPR and seasoned 7.5s paying 59 CPR," the analysts said. "Diminished levels of burnout are expected in a record low mortgage rate environment."

Among Ginnie Mae securities the speed-up was similar, as CPR gains at and above the 6.5% coupon level were "nearly identical" to those for conventional MBS, they said. As an example, they pointed to the Ginnie Mae 6.5% coupon, in which "every significant vintage" added about 10 CPR, similar to the increases recorded in the comparable Fannie Mae and Freddie Mac MBS.

Messrs. Westhoff and Kramer welcomed an announcement by Ginnie Mae, an agency of the Department of Housing and Urban Development, that it has adopted a new policy for repurchasing delinquent loans from Ginnie Mae mortgage pools, allowing buyouts only when no payments have been made for three consecutive months.

The new policy will take effect with loans placed in pools with an issue date of Jan. 1, 2003. It will not apply to pools issued before then.