Capstead Mortgage Corp., a REIT that invests in GSE-backed MBS, is warning that higher prepayments will hit the market in the second and third quarters because of efforts by Fannie Mae to "buy out" delinquent loans from MBS pools.

Capstead also believes that government-sponsored loan modifications will play a role in faster prepayment speeds on the securities it buys, possibly putting its earnings under some pressure.

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