Prepayments were expected to decline 8% on 30-year FNMAs and by 26% on GNMAs. Factors contributing to these expectations were a lower number of collection days — 19 versus 22, while the Refinance Index was 10% lower on average in December from November.

Conventional prepayment speeds, however, slowed modestly more than predicted. 30-year FNMA MBS in our sample fell 13% overall. While aggregate speed declines on 5s and 5.5s were generally in line with expectations, 2008- 2006 vintage 6.5s and 7s were 10% to 6% slower, respectively, versus a projection of flat to increasing 16%. FHMLC Golds also slowed more than expected with relatively uniform percentage declines across coupons and vintages.

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