Lower coupon speeds increased less than was expected in November given the elevation in the Mortgage Bankers Association's Refi Index that averaged near 5000 over September, October and November. As a result of capacity constraints at mortgage lenders that limited the amount of refinancings they could process, this spilled over into December resulting in prepayment speeds being unexpectedly higher.

Speeds on 30-year FNMAs were projected to slow between 2 percent and 3 percent on average in IFR Markets' sample with 5 percent and lower coupons declining 3 percent to 5 percent and Home Affordable Refinance Program (HARP) coupons slipping by 1 percent to 2 percent. Speeds, however, increased between 6 percent and 8 percent on 4.0 percent coupons and above. The story in Freddies was similar with speeds predicted to slow over 4 percent on average but they increased by a like amount.

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