As conforming mortgage rates drop closer to 7%, market observers are expecting the first major refinancing period since November 1998. On the home-equity front, however, the wave is not expected to be as strong.

"Normally, home equities will not respond to a refi wave nearly as much as the agency market," said Tom Zimmerman, an asset-backed researcher at UBS Warburg (formerly of PaineWebber). "There are a couple things that have changed over the past couple years since the 98 wave that will make them even less sensitive to interest rates."

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