Although refinancing has continued to be muted given all the post-downturn market conditions that counteract today's low mortgage rates, some pools of loans have prepaid surprisingly quickly.

Derek Chen, a researcher at Barclays Capital, said in an interview Thursday that he still thinks the best those looking for a pickup in refinancing can hope for is a mini-refi wave in a historical context.

But though the overall level of refis is expected to remain low, the "tiering" in terms of relative prepayment spikes in some areas is going to be pronounced because of factors such as whether loans are eligible for the government's Home Affordable Refinance Program or not, for example, he said.

Some of this is proving to be a question of timing. Take, for example, a recent ramp up in prepayments of lower-coupon mortgage-backed securities (those with coupons of 4.5% and 5%) that surprised Barclays and some others. This followed a surprise to the downside in the previous prepayment report, suggesting there was a backlog of loans as originators geared up for a surge in demand, Chen said. He said this means that the surge was likely a one-time event and that the next increase in prepayment speeds will be smaller.

Though some in the MBS market appeared surprised by the spike in voluntary refis on lower-coupon bonds, Mahesh Swaminathan, a researcher at Credit Suisse, said this was in line with his firm's view that these bonds have been very sensitive to rate changes. However, he said faster-than-expected 2008 speeds surprised Credit Suisse and others.

According to a Credit Suisse report Thursday, traditional factors like loan balance and note rates largely explain the prepayment-speed spike in the 2008 vintage compared with 2009. The report projects that the latter will catch up in a further rally, noting that this counters the argument by some that the 2009 vintage will remain slow to prepay because of a higher Home Affordable Refinance Program impact on the 2008 vintage.

Swaminathan said he believes the program does play a role but the two vintages' convergence is just a question of timing and incentive to refi. When adjusted for the latter, the convergence appears to be underway, he said.

As Credit Suisse notes, although prepayments have spiked for lower-coupon paper, higher-coupon speeds remain tame. Still, investors remain fearful of a government-driven "auto-refi" spike. Credit Suisse has been in the camp of those who think this is highly unlikely, but it still finds many investors pricing the possibility into the market. Credit Suisse has measured the potential prepayment impact of an auto-refi on the prepayment speeds of Fannie Mae's 6%-coupon MBS as one would measure the severity of a hurricane. It found the market is pricing in a 44% chance of a "category three" auto-refi and a 100% chance of a "category one" after 12 months.

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