The October FNMA prepayment report - reflecting September activity - showed overall speeds were down 18% and 30-year FNMA discounts slowed significantly by more than 20%. The 15-year sector showed comparatively less declines, with 2003 15-year 4.5s and 2003 FNMA 5s almost converging.
As mentioned, the decelerating speeds exceeded expectations, as previously, Street consensus was projecting only a general slowing of 13% to 15%. Specifically, 2003 FNMA 5.5s were down 21% to 21.3 CPR from 26.1 CPR and 2004 FNMA 6s were down 23% to 29.2 CPR from 36.3 CPR. Also, ARM prepayments were down sharply as well. For instance, 2004 FNMA 3/1s declined 15% to 32.8 CPR from 37.4 CPR.