Prepayment speeds are expected to increase around 10% or more in August as the higher day count - 23 days versus 20 days in July - partially offsets a modest decline on average in July refinancing activity. JPMorgan Securities analysts estimate paydowns will increase to approximately $40 billion from $34 billion in July.

At this time, speeds in September are currently projected to decline around 10% to15% with the number of collection days (20) once again being a factor. However, potentially limiting the decline is a pickup in borrowing activity in response to the latest rally.

JPMorgan analysts, in explaining their projection for increased speeds for the September report, stated that the seasonal factor is usually 5% higher for August compared to July and there are three more collection days. But they noted that the Mortgage Bankers Association Refinancing Index - using five-week lags - has dropped 7%. Overall, JPMorgan said that they expect paydowns to be up 15% to just under $40 billion.

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