Mortgage refis a silver lining to market woe?

As of Friday, the rate on a loan eligible for Fannie Mae or Freddie Mac mortgage bond programs was about 5.9 percent, they said. But tight credit conditions makes mortgages act as if rates were 0.3 percentage point higher, they said.

"If mortgage credit was readily available, that rate would bring us to the brink of a refinancing wave," they said.

The Mortgage Bankers Association's refinancing index has plodded along at levels a fifth of the 5,000-plus levels early this year when the 30-year mortgage rate was last below 5.5 percent. As the rate dropped to 6.06 percent in the first week of September, the index rose to 1,222.9 from 1,059.7.

The next step for greater affordability may be a drop in fees imposed by Fannie Mae and Freddie Mac to offset some of their risks in the ailing housing market, Federated's Abraham said. The "adverse market delivery charges" and other increases on guaranty fees are likely to be unwound after nationalization of the companies reduces profit motives, he said.

"It's a bit early to tell the full impact of the Lehman bankruptcy and BofA buyout of Merrill Lynch, but I do think what we will see going forward is a declining rate environment as the government seeks more natural ways to stimulate market rather than simply going for bailouts," said Paul Blaylock, president of National Lending for Ace Mortgage Funding, an Indianapolis-based mortgage banker.

(Additional reporting by Lynn Adler and Julie Haviv; Editing by Jonathan Oatis)