Lenders, investors, and Wall Street are bracing for another refinancing wave.

With interest rates falling, "we're very close to the point where people are going to be thinking about refinancing" mortgages, said Peter Rubinstein, a senior vice president for mortgage strategy at PaineWebber Inc.

The Mortgage Bankers Association's refinancing index, which serves as a guidepost for investors, has been on what some call a "real tear" recently. On Nov. 14 it stood at 758.2, up from 632.7 a month earlier.

"Investors are more gun-shy about mortgage-backed securities right now, given what's going on in the financial market," said Mark Zandi, chief economist at Regional Financial Associates. "They're going to want a little bit more in terms of yield than if they invested in a Treasury security."

The last refinancing wave in 1993, when mortgage rates dipped below 7%, resulted in record volumes of mortgage security issuance. But some investors got burned when consumers prepaid loans, cutting off interest income.

Investors have already moved to protect their portfolios.

"We have taken some steps to insulate ourselves from prepayment risk," said Donald J. Wingo, senior vice president for corporate investment at NationsBank. "We have been rolling down in coupons over the past couple of months; plus we have purchased some floors as well as some strips," he said, detailing the bank's hedging methods.

NationsBank's investment portfolio in mortgage-backed securities is concentrated in 15-year mortgages because they are less susceptible to prepayment than the 30-year mortgages, Mr. Wingo said.

"As far as interest rates, we think they probably are going to work their way irregularly lower over the course of the next few months," Mr. Wingo said. "That obviously assumes that the fallout from the Pacific Rim filters through our economy into some slowdown." NationsBank expects prepayments to continue to pick up in the spring, he added.

"I think the Street will see probably less mortgage-backed security activity if rates keep falling," said Mr. Wingo. "I think certainly the mortgage-backed security market will lag in a lower rate environment and spreads will continue to widen."

The late fall season is a time when lenders often experience greater numbers of refinancing applications. This year lenders have noticed that homeowners are more educated and prepared to refinance after the refinancing wave four years ago.

Refinancing accounts for about 50% of mortgage applications at Washington Mutual Inc., Seattle, up from about 35% in the summer. But Craig S. Davis, executive vice president of lending and financial services, attributed the change to seasonal factors.

Refinancing activity at HomeBanc Mortgage Corp., Atlanta, has almost doubled in the last 90 to 120 days to between $15 and $20 million per month. "Americans have now learned how to refinance and as a result they are more likely to do so, and it's just a question of financial value that can be obtained," said Patrick S. Flood, president of HomeBanc.

But Mr. Flood said it would probably take another half-point decline in interest rates to create a wave of refinancing comparable to 1993's.

With low rates, Mr. Davis said, "there is the likelihood that we will see continued momentum in the refinancing business. Low rates also bode well for an extremely strong purchase market."

Some economists said the refinancing boom is in its early stages. "It's already started," said Mr. Zandi. "We're in the midst of a fairly significant refinancing wave, and it's been building since the summer.

"Refinancings are accounting for about 45% of total originations," he said. "That's up from about 20% this spring."

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