Freddie Mac prepayments moved higher in April on the strength of seasonal increases in housing activity. However, the increases were smaller than those experienced by Fannie Maes from February to March.

"Freddie Mac's April prepayments followed the path established by last month's Fannie Mae speeds, increasing by 14% to 24% on an aggregate basis for Gold 6s through 7.5s," said John Vibert, an MBS researcher at Credit Suisse First Boston. "Among premiums, April's prepayment increases were considerably more subdued."

"Fannie Mae speeds might experience even smaller increases," said another Street mortgage researcher. "Remember, the Freddie Mac collection period is from the middle of the month to the middle of the month, in contrast with Fannie Mae and Ginnie Mae, which collect from the first to the thirty-first."

According to Vibert, speeds on 30-year 6s through 7.5s 14% to 24% on a percentage basis. In contrast, premium speeds were mixed as higher mortgage rates dampened refinancing activity, offsetting the seasonal and day-count increases in turnover activity.

The pattern of Freddie and Fannie prepayments for the last several months reflects an increase due to the Y2K effects, which should fade, sources say. Over the next couple of months, speeds should stabilize before rising into the mid-summer months due to normal seasonal effects.

According to Jonathan Raiff, an MBS analyst at PaineWebber Inc., the rise in prepayment speeds was not surprising because there were more business days in the latest reporting period. Also, the pickup in Freddie Mac prepayment speeds can be tied to a seasonal pickup because demand for housing picks up in the spring, Raiff said."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.