Although nobody in the mortgage market is denying the onset of a fairly significant refi boom comparable to the one in 1998 (see ASR 1/15/01), some participants are taking the bloated numbers of the latest MBAA Refi Index survey with a grain of salt.

With the Index increasing from 1572.1 to 2800.6 last week and refinancing activity representing 64.1% of total applications, market analysts and investors were a little bit taken aback; however, some observers were attributing the high numbers to other factors, such as overall consolidation of the mortgage banking industry and a phenomenon known as "WAC creep," whereby incremental increases in weighted average coupons cause equivalent prepayment-speed increases.

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