Conventional wisdom says that in today's declining interest rate environment, adjustable-rate mortgages will refinance to fixed-rate loans.

Indeed, wary of ARMs adjusting to rates higher than are available on 30- year, fixed-rate loans, borrowers are refinancing away from ARMs to fixed- rate mortgages.

"As a rule of thumb over the last couple of months, most ARM pools have doubled in speed," said Dale Westoff, an analyst at Bear, Stearns & Co.

Mr. Westoff said prepayment speeds of Freddie Mac nonconvertible loans originated in the first half of 1992, which accounts for more than a million loans, have increased from an index figure of 22 cpr to 38 cpr. He said he would expect prepayments to exceed that in August and September, when he expects prepayments to peak.

In 1992 and 1993, he said, speeds were 30 to 35. In 1989 and 1990, when the yield curve was inverted, peak speeds for nonconvertibles were in the low 40s, he said.

"They are already around 30, so that is a realistic level to see again in the next couple of months," Mr. Westoff said, because adjustable loans are resetting to 7.5% and 8%, which is the same as some fixed loan rates.

Another analyst said one product prepaying relatively quickly is adjustable loans offered by Ginnie Mae, the Government National Mortgage Association.

Linda Lowell, who follows Ginnie Maes at Paine Webber, said these loans in particular prepay faster than do conventional loans, despite what many in the industry think.

"The prepayment risk is actually greater in the last 14 months of production," she said, "but it is hard to see now because many of these loans are not yet out of the teaser period."

Nonconvertible loans will be sensitive to the declining interest rate trend, Ms. Lowell said. Borrowers who recently closed loans will refinance outright if they do not like the conversion rate.

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