While many mortgage bankers are quick to lay the blame for repeated refinancings on mortgages with reduced closing costs, a recent report from Merrill Lynch, New York, points instead to the influence of streamlined refinancing procedures.

"The intuition here is that streamlined refinancing has the effect of increasing the financial incentive to refinance, when some financial incentive already exists," according to the report, by Arnold Shapiro and Rick Klotz.

Definition Varies

A homeowner with the option to refinance easily and quickly will behave as if the financial incentive to do so were greater than would a homeowner who must refinance through traditional means, according to the study.

This may be a bitter irony to mortgage bankers who, laboring under a crushing volume, generally view streamlined procedures kindly.

While the definition of a streamlined mortgage varies across the industry, generally they allow homeowners to refinance with less documentation, less-frequent appraisals, and fewer other burdens.

"Streamlining has certainly been an important tool to enable mortgage bankers to handle the refinancing boom," said Larry Grubb, senior vice president at Banc One Mortgage Corp., Indianapolis.

Folding in Closing Costs

While Mr. Grubb terms streamlining "a factor" in raising the level of refinancing, he, like many others in the industry, believes that low-cost and no-cost mortgages are the real engine behind the change.

Such mortgages allow a consumer to fold part or all of the closing costs into the mortgage, resulting in a higher coupon rate.

Joseph Krul, senior vice president at Standard Federal Bank in Troy, Mich., agrees. "I'm not sure that brokers who operate around the country are concentrating all that much on streamlined product," he said.

If Rates Rise

Of course, neither low-cost mortgages nor streamlined ones alone can make consumers refinance; it takes falling rates.

"If rates would just rise 2 5 basis points and stay there a couple of weeks, we wouldn't have to worry about this. No one is going to refinance to pay more." said Mr. Krul.

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