The available pool of eligible mortgages that qualify for the Home Affordable Refinance Program refinancing continued to narrow among the big lenders — Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) — according to the Royal Bank of Scotland’s December prepayment report.

It's a trend that may yet reverse as more HARP refis may eventually need to be refinanced again — something referred to as re-HARPing by BofA. In such an event, an estimated, additional 500,000 borrowers may become eligible for another extension.

Currently, however, HARP-able homeowners are surging to get refinanced, making the eligible bucket shrink fasted. RBS projected lenders will continue to wrap up these loans, closed in anticipation of the December g-fee hike.

The analysts report those g-fee increases priced into mortgage earlier than expected, so lately speeds were more sluggish than expected, the report stated.

Generally, JPM remains the most consistent HARP refinancer, prepaying faster than any other lenders, especially in the highest coupons. However, in November, the big lender prepaid at much slower rates.

The prepayments of Chase dropped 14% from 48 constant prepayment rate to 41 CPR for coupon 6s. The prepayments of Wells Fargo also fell 13% from 43 CPR to 37 CPR.

Click on the chart to see prepayments by the big lenders.

Chase and Wells Fargo are expected to exhaust their own supply of HARP-eligible borrowers faster than any other major lender, according to Deutsche Bank.

However, the remaining pool of homeowners still eligible for HARP could lead to pressure for an extension past the Dec. 31, 2013 deadline. 

Since March, composition of HARP lending has changed considerably due to agencies making their automated underwriting systems more largely available.

Bank of America and Citi prepaid only marginally slower, with less than 5% decline. Thus, prepayments between fast and slow HARP refinancers are beginning to show signs of convergence.

For example, compared to Bank of America, Chase prepaid 9 CPR faster in November compared to 3 CPR faster in December. 

"This speed convergence indicates that competition among the lenders may narrow the discrepancy of HARP efficiency over time," the report stated.

In October, the Mortgage Banker Association warned it expects to see $1.3 trillion in mortgage originations during 2013. This is down more than 25% from its revised estimation of $1.7 trillion in 2012.

Jay Brinkmann, MBA Chief Economist remarked: "We expect 2013 refinance originations to play out like our original expectations for 2012, with a long tail of refis extending through the first half of the year followed by a rapid drop-off in the second half."