The mortgage refinancing boom is making low-credit-quality and high- loan-to-value mortgages more attractive to Wall Street investors, and could also spawn more of a market for loans with prepayment penalties, according to a top PaineWebber mortgage executive.

Subprime borrowers are less able or less inclined to refinance, and that makes securities backed by subprime loans safer for investors, said Peter Rubinstein, senior vice president mortgage strategy at the firm. "You're dealing with prepayment-challenged borrowers," he said.

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