As prepayment speeds continue their dramatic increase, MBS observers have been citing the ever-shortening lag time between the initiation of an application and the closing - known as the "lag effect." But while this lag has certainly decreased - aided by the increasing efficiency in the processing of refi applications - some analysts contend that the lag-effect explanation may be an oversimplification.

Indeed, close scrutiny of recent prepayment data actually shows a much more complicated and varied picture than what is perceived at first blush.

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