Prepayments on FNMAs increased slightly less than expected: over 29% to a 34 CPR average  versus a projected 36% increase to 36 CPR.

Specifically, 6.5s and 7s declined somewhat more than expected at between 63% and 64% versus the close to 60% predicted, while 6% coupons, which were the target of delinquency buyouts in April, jumped 140% versus an expected surge of nearly 160%.

Meanwhile, 30-year FHLMC Golds and GNMA speeds slowed a bit more than anticipated. Factors influencing the April report were a slightly lower number of collection days at 22.5 from 23, while refinancing activity slipped around 4% on average in March from February, even as mortgage rates held below 5% through most of the month.

In terms of conventional speeds, analysts discussed the difference on certain vintages for FNMA and FHLMC 6.5s and higher.

Barclays Capital analysts believe the FNCL/Gold differential will increase over the next several months as FNMA has a large amount of loans that are non-consecutively 120-day or more delinquent or in workout.

They said these were not included in FNMA's current buyout plans, but should keep its roll rates and buyout speeds higher compared with FHLMC Golds.

Overall, eMBS reported that FNMA MBS prepaid at 29.1 CPR in April, up 5.1% from March, while FHLMC and GNMA MBS declined 8.2% and 13.4%, respectively, to 16.7 and 11.6 CPR.

Conventional issuance totaled $56.1 billion, paydowns were $101.8 billion, putting net issuance at a negative $19.4 billion. GNMA issuance was $29.4 billion, paydowns $10 billion, resulting in positive net issuance of $19.4 billion. Combined net issuance year-to-date is negative $65 billion.

Looking ahead to the May report, FNMA's buyouts will be concentrated in 5% and 5.5% coupons. Credit Suisse analysts cautioned that benign prints in April for 5.5s imply that FNMA 5.5 TBA could prepay in the high 60s to low 70 CPR, which would put pressure on the FNMA 5.5 May/June roll. At the same time, they acknowledged the roll could hold as the fail situation might not yet be resolved.

Barclays analysts projected 2007 vintage 5s and 5.5s could hit 53 and 63 CPR, respectively. JPMorgan analysts have a similar outlook.

Heading into this prepayment report, May activity that will be reported in June for FHLMC Gold and GNMA speeds is expected to decline around 10% on average.

In addition to a lower number of collection days —20 days in May versus 22.5 in April, refinancing activity was lower on average by 20% in April from March, based on the Mortgage Bankers Association's Refinance Index, as mortgage rates averaged 11 basis points higher, according to Freddie Mac's survey.

Overall, paydowns are estimated to hold in the $112 billion area at this time. Updated prepayment outlooks will be available in the next week or so.

While the recent flight-to-quality rally could push mortgage rates back below 5%, refinance response is expected to be under whelming. 

JPMorgan analysts said they are unconcerned with the prospect of a significant spike in speeds related to refinancings over the near term, partly because borrowers have seen these rate levels several times already.

In addition, as the latest Senior Loan Officers Opinion Survey reported, credit standards remained tight while loan demand was weaker.

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