As of press time last Thursday, prepayment analysts were expecting Friday's Freddie Mac report to exhibit incremental increases in the cuspy coupons, but to move sideways in the high premium arena.

Experts say that those with a high incentive to refinance, or the higher premium borrowers, will not cause a pick-up in prepayment speeds because they are competing with lower coupons and more seasoned product.

Most of the market believes that prepayment speeds had reached their peaks with the Friday report, and a slowdown will manifest itself in succeeding releases.

"We'll start to see a slowdown beginning with the June figures which will be reported in July," said one prepayment analyst. "But the Friday report will still be at the peak of the current refinancing wave."

Some experts believe that the slowdown would begin later rather than sooner because of the backlog effect.

"Anecdotal evidence suggests that mortgage originators are close to capacity, which means not all of them can process the loans that they have in their pipeline already," said Glenn Boyd, an associate director from the mortgage strategy group at UBS Warburg.

He explained that there is basically a backlog of loans, so even if applications were to drop, as they have in the last month or so, mortgage originators still have a backlog of loans to process through. This is why payments will likely not plummet as rapidly as applications have.

Boyd expected a rather robust showing for the Friday report. Aside from the anecdotal evidence mentioned above, he said that if one looks at rates and the MBA Refi Index, and considers a 5-6 week lag between rates and prepayments, which is typical of what is currently happening, then the period of time that was driving prepayments seen in the Freddie release last Friday should be the March figures. This would include the big rally at the end of March and a peak in refinance applications as measured by the Index.

After Freddie's report, Ginnie Mae and Fannie Mae will release theirs on Thursday.

The upcoming releases are expected to have a similar story. "I think that the Ginnies and Fannies will be muted compared to the Golds," said Boyd. But it's pretty much the same story. There's a backlog of applications, and you should see people refinancing as part of the rally in late March."

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