Analysts have identified burnout in seasoned higher-rate mortgages as a source of last week's drop in the Mortgage Bankers Association (MBA) Refinancing Index.

In a report, Countrywide Securities said seasoned high coupons usually experience less sensitivity toward refinancing opportunities right after a refinancing wave - which is more simply known as prepayment burnout. Heavy refinancing activity usually eliminates higher-quality borrowers from the pools, leaving borrowers with credit issues or non-appreciated homes. Lack of financial sophistication may also be contributing to a segment of borrowers not leaping for the refi incentive.

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