Prepayments declined as expected in September as there were three less collection days. Speeds on Fannie Mae 5.5% coupons and lower were pretty much in-line with expectations.

However, higher coupons slowed more than consensus had predicted.  For example, 6s and 6.5s were anticipated to decline 5% or less and instead fell 9% and more. It would appear that less of the refinancing activity that began to show up in August closed in September. This is possibly related to delays associated with reappraisals given the slowing in the housing market and home price appreciation. However, more of the effect of the lower mortgage rates and pick-up in refinancing activity is expected to show up in the next couple of reports.

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