Freddie Mac and Ginnie Mae released their June prepayments yesterday evening, while Fannie Mae is scheduled to report tonight.

GNMA speeds were in line with expectations of remaining almost the same. However, coupon and vintage dynamics were different. The 5% through 7% 2008 vintages prepaid much slower than expected, slowing 18% from May versus a projection for them to remain unchanged. The 2007 vintages were also slower for the most part, with the exception of 5% coupons that surged 50%. The 2006 vintages also slowed with the exception of the 5% coupon, which was 3% faster. Older vintages mostly increased from May.

FHLMC Gold speeds increased 3% overall. Prepayments generally remained almost the same for 5s through 6s, while 6.5s and 7s increased 10% to 20% from May. JPMorgan Securities  analysts said that the 2003 through 2005 vintages are the slowest among major cohorts — even though they are less affected by home price declines than 2006- 2008 vintages. Analysts attributed this in part to more credit impairness in the group.

As noted above, Fannie Mae reports late this afternoon/early evening. Speeds are predicted to increase around 8% in June. Factors influencing the report were a decline in the Mortgage Bankers Association Refinance Index in May from April of 32% on average, while day count increased by two.

According to eMBS, FHLMC Golds prepaid in aggregate at 24.4 CPR in June, down slightly from 24.8 in May, while GNMA declined to 23.6 CPR from 29.6. Gross issuance for the two totaled $102.4 billion, paydowns were $56.5 billion, leaving net issuance at $45.9 billion.

For July, speeds have been projected to decline in July by 10% in FNMAs and nearly double that in GNMAs as refinancing activity plunged in June on higher mortgage rates.

Based on Freddie Mac's mortgage rate survey, 30-year fixed mortgage rates averaged 5.42% in June, up 56 basis points from May's average with the Refinance Index responding by dropping 49% to an average of 2051. August speeds are expected to be down nearly 30% from July in FNMAs, while GNMAs are projected to be around 10% lower.

Mortgage Applications

Last week, Freddie Mac reported a 10 basis point decline in the 30-year fixed mortgage rate to 5.32% with an average 0.7 point.

Despite the improvement, no point rates are still around the 5.5% area which will continue to limit refi interest. Last week also included the July 4 holiday, which will also have had some influence on mortgage application activity.

For the week ending June 26, the Refinance Index plunged 30% to 1482, its lowest level since November.

Credit Suisse analysts believe rates below 5% "are necessary in order to trigger a renewed refi surge."

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