After peaking at 4538 for 2012, refinancing activity has declined for three straight weeks as mortgage rates remained above record lows.

The Mortgage Bankers Association (MBA) reported the average contract interest rate for 30-year fixed rate conforming loans eased one basis point to 4.06%, while Federal Housing Administration mortgage rates rose one basis point to 3.87%.

According to the MBA, the Refinance Index declined 2% to ~4141, after adjustment for the Presidents' Day holiday, and its eighth consecutive week above 4000. As a percent of total application activity, refinancing share declined to 77.0% from 77.9% previously, and is at its lowest level since early December.

There was no mention of Home Affordable Refinance Program (HARP) application activity, although it is starting to creep into higher coupon prepayments.

While February prepayments rose more than expected for a combination of reasons, Deutsche Bank Securites said last month's pattern of increases suggested no significant effect from HARP 2.0 yet.

Barclays Capital added that last night's report "is supportive of a gradual, not sudden, pickup in prepayments due to HARP 2.0." More on February prepayments will be out later this morning.

For the month of February, the Refinance Index averaged 5.7% higher from January as 30-year fixed mortgage rates averaged three basis points lower to 3.89%. Prepayments are expected to increase further in March based on the combination of increased refinancings resulting from the record low mortgage rates experienced in the first three weeks of February, HARP activity, and a higher number of collection days at 22 from 20.

Meanwhile, purchase activity was more responsive to the record affordability levels with the index increasing 2.1% to 179, which follows on an 8.2% increase in the prior week. The index, however, remains well below this year's peak of 195 recorded in mid-January. Overall, mortgage application activity declined 1.2% last week.

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