Not surprisingly, a new low in mortgage rates buoyed refinancing activity in the week ending Feb. 3.

According to the Mortgage Bankers Association (MBA), the Refinance Index jumped 9.4% to 4500.7, essentially matching the recent high recorded for the week ending Jan. 13. This was the fourth straight week the index was above 4000.

As a percent of total applications, refinancing share was 80.5% compared to 80.0% in the previous week.

Still, the index remains 7.5% below 2011's high of 4866.7 recorded in mid-August as mortgage rates dropped from between 4.5% to 5.0%, where they had been through most of that year, to around 4.30%. Refinancing share, however, was lower than the record high of 82.2% for Jan. 13 week.

The MBA reported 30-year fixed conforming mortgage rates declined to a new record low of 4.05% from 4.09%, while the Federal Housing Administration (FHA) rate also moved to a new low of 3.89% from 3.96%.

Recently, the government component of the Refinance Index has spiked as mortgage rates have dropped.

In a report this week, Nomura Securities analysts explained that the latest rally in mortgage rates together with lower FHA rates versus conventional have led to a much larger increase in refinanceability for borrowers underlying 30-year GNMAs than FNMAs. The increase in the government index is also related to conventional-to-FHA refis and not just FHA-to-FHA refinancing.

While higher, the Refinance Index is muted relative to rate levels given the difficulty for many borrowers to refinance.

For example, while 95% of the conventional universe has an incentive, JPMorgan Securities analysts said. This means that only 20% are considered "clean and can streamline" and 24% are seen as "moderately impaired.'

They pointed out that while another 40% of borrowers have a clean profile, their loans were originated after May-2009, which is the Home Affordable Refinance Program cut-off date and are not eligible under the program. Even though these borrowers can still refinance, the streamline refinance option is not available to them. The final 16% either have a no-rate incentive or are severely impaired.

Meanwhile, the Purchase Index remained almost the same at 181.9 from 181.7 in the prior week. Overall mortgage applications were up 7.5%.

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