Prepayment Speeds Surge in December.

Prepayment rates for 30-year mortgage loans in Fannie Mae and Freddie Mac mortgage-backed securities rose 13% in December, according to the Bear Stearns Prepayment Commentary.

The aggregate speed of 30-year Fannie Maes stood at a constant prepayment rate of 9.0 CPR, up from 7.7 CPR in November, and 8.4 CPR for comparable Freddie Macs, up from 7.6 CPR in November.

Bear Stearns senior managing director V.S. Srinivasan said the company believes the December prepayment report "reflects some of the early response" to the rally in mortgage rates that began in late November.

"Given the low level of mortgage origination activity, the lag between changes in rates and the ensuing prepayment response has likely decreased," he said.

Prepayments on 15-year Fannie Mae and Freddie Mac collateral rose by 9% in December, with Fannie speeds climbing from 8.3 CPR to 9.2 CPR and Freddie speeds increasing from 8.1 CPR to 8.7 CPR.

Ginnie Mae speeds rose 9%, with the biggest percentage increase coming in the 6.0% coupons of 2007, Bear Stearns reported. The speeds jumped from 5.5 CPR in November to 11.7 CPR in December and are running nearly 2 CPR faster than comparable Fannies and Freddies.

"While some of this increase can be attributed to the recent rally in rates, we believe that servicer buyout activity probably contributed significantly as well," Mr. Srinivasan said.