Prepayment data released by Fannie Mae and Freddie Mac shows prepayments on loans packed into mortgage-backed securities declined somewhat in April, according to analytics firm Keefe, Bruyette & Woods (KBW).

KBW says prepayments fell modestly in April after increasing in both the months of February and March. It was expected the government's enhanced version of the Home Affordable Refinance Program, or HARP 2.0, would create stronger prepayment data in early 2012 with analysts believing the additional refinancing opportunities would increase prepayments within MBS securities.

Increases were noted in February and March, but April brought a decline in prepayments. 

Total prepayments at Fannie Mae declined from 24.7% in March to 22.5% in April. Meanwhile, prepayments on Freddie Mac MBS loans declined from 26.7% in March to 24.8% in April.

KBW says HARP-eligible loans with higher coupon mortgages dealt with increasing prepayments while prepayments on newer, vintage MBS slowed in April.

"This trend suggests that organic prepays have likely peaked unless interest decline further," KBW analysts wrote in the report. "However, we believe that refinance activity could stay at current levels for some time driven by HARP volume. Further, the spread between primary (borrower) rates and the secondary (MBS) rates remains very wide at more than 100-basis points. This suggests that industry capacity constraints are allowing originators to continue to have pricing power. This is a positive for both mortgage originators (by keeping gain-on-sale margins high) and MBS holders (by keeping prepayment rates steady at manageable levels)."

The conditional prepayment rate on Fannie's 30-year, fixed-rate MBS fell from 25.8% in March to 23.7% in April, while the 15-year, FRM MBS declined from 22.6% in March to 19.2% in April.

In addition, the conditional prepayment rate on Freddie's 30-year, fixed-rate MBS declined from 28.2% in March to 26.2% in the most recent report, while the 15-year fixed rate fell from 23% in March to 20.5% in April. The conditional prepayment rates for the 10- and 20-year, fixed-rate MBS at both GSEs also declined modestly.

Hybrid ARM MBS prepayments speeds, on the other hand, increased in April for both GSEs.