Prepayments, mostly through refinancing, on mortgages backing Fannie Mae and Freddie Mac securities increased substantially in September, higher than what some analysts expected. Average mortgage rates slipped below 4% in the Freddie Mac survey released Thursday. But unemployment remained elevated and the 11 million underwater homeowners are shut out of taking advantage of the lower rates. Still, Treasury Secretary Timothy Geithner said the administration is moving forward with plans to help more homeowners refinance out of higher rates, and the Federal Reserve is busy pushing rates even lower with its so-called Operation Twist," which started Monday. "While increases were expected given the continued decline in mortgage rates, we would characterize the September fixed-rate [conditional prepayment rate] as being on the high end of our expected range," said analysts at Keefe, Bruyette & Woods. The conditional prepayment rate is the percentage of remaining principal outstanding in a pool of loans expected to be paid off that particular month. In September, the total prepayments for Fannie Mae jumped to a CPR of 21.7%, up from 17.5% expected the prior month and 15.4% in July. Prepayments for Freddie Mac went to a CPR of 22.1% in September from 17.4% in August and 15.2% in July. A Freddie executive said recently refinancings accounted for roughly 85% of the firm's business in the first quarter. "We expect prepayments to continue to trend up in coming months driven by organic refi activity," KBW said. Write to Jon Prior. Follow him on Twitter @JonAPrior.