Mortgage market players considered the second quarter of 1999 to be a particularly rough period for the industry, as the direction of several of the fundamental technicals for mortgages - a lengthening of durations, a steepening of the yield curve and an increase in volatility - were all reading red.

"As you stack up all those fundamental factors that are generally thought to determine mortgage performance, it signified a red light for the industry," said Michael Youngblood, managing director of real estate research at Banc of America Securities. "We have yet to get any real break in new issuance volume, and there was an inversion of the term-structure of volatility. We only expect one of the factors - volume - to turn into a very solid green light going forward."

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