Not only are prepayment speeds for both Fannie Mae and Freddie Mac MBS expected to increase for both February and March, but each will outpace the other, analysts say, in a "leapfrogging" pattern rather than a "catch-up" pattern.

When rates drop at a rapid pace, Freddie speeds tend to replicate those of Fannie, with a lag. But some observers are saying that February FHLMC prepayments could easily leapfrog Fannie's January speeds.

"The reporting deadline is the 14th, so if there is a lag issue, a lot of the loans that close for Freddie didn't make the Fannie report," an analyst said. "The longer the loan, the longer the lag. So Freddie speeds will leapfrog the Fannie speeds. And if the February Fannie is fast, the March Gold report will be very fast. So the March Fannie report will be horrendous."

Ginnie Mae speeds were very fast this month as well. Of course, the Federal Housing Administration insurance premium fee was set to go down as of the first of this year, so participants who had an incentive to prepay before were advised to hold off.

"So there were pent-up prepayments in the January report," a researcher said. However, other factors affecting the GNMA speeds are a heavier wholesale component in the government market and more active broker activity.

Furthermore, the huge jumps in prepays across the board for all the GSE mortgage debt can be attributed to both the media effect and what has been dubbed the "new low effect," whereby first-time buyers who took out loans in 1998 or 1999 are now seeing the lowest rates they have ever seen.

"The 7% threshhold is important in people's minds," the researcher said. "When we hit that at the beginning of January, it brought a lot of activity to the market."

In FHLMC's latest mortgage rate survey, 30-year fixed-rates gained 11 basis points to 7.12%. The Mortgage Bankers' Association Refi Index fell 11%, while the AFS Title Search declined almost 6%.

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