Prepayment differences between FNMA and FHLMC past the 12-month point are not significant. Thus, as a pool seasons FHLMC and FNMA prepayments should converge. Therefore, in view of the recent price spread correction between FNMA and FHLMC collateral, it appears that the market may be over-correcting for the actual short-term prepayment difference. As a result, there is particular value (relative to FNMA) in FHLMC MBS that are nearing the end of their ramp.

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