Although market and refinance indices continue to fall from peak levels, the current low-interest rate environment and strong volume through the Home Affordable Refinance Program will keep mortgage banking trends elevated, said Keefe Bruyette & Woods in its latest report.

For instance, mortgage originations totaled $525 billion in the fourth quarter of 2012, up 2.9% from a revised $510 billion in the third quarter of 2012. Mortgage originations were also up 31.3% from $400 billion year-over-year, according to Inside Mortgage Finance.

"Fourth-quarter mortgage banking results were generally positive, driven by continued strong gain-on-sale margins and modestly higher mortgage origination volume," said Bose George, Jade Rahmani and Ryan O’Steen of KBW.

They added, "While margins were down from 3Q levels, they remain elevated, driven by industry capacity constraints, the low-interest-rate environment, and strong volume through HARP."

Meanwhile, refinance activity accounted for 74.1% of total origination volume, while the Mortgage Bankers Association reported a 75% refi share for the quarter, Inside Mortgage Finance noted.

Originations for the top 25 mortgage originators ticked up 1.1% to $389 billion from $385 billion in 3Q12, and increased 11.6% from last year. Additionally, the top 25 originators contributed 74.2% of total originations for the quarter, down from 75.5% the previous quarter, KBW stated.

Banking giants Wells Fargo (WFC) and JPMorgan Chase (JPM) lead the way as the largest originators, with market shares of 23.9% and 10.3% of originations, respectively.

KBW also pointed out that only seven of the top 25 lenders experienced 'sequential declines' in origination volume for the fourth quarter.

Shifting gears to agency mortgage-backed securities, the constant prepayment rate for Fannie Mae was 24.5% in February, down from 27.6% in January and 28.7% in December.

Additionally, prepayments for Freddie Mac also decreased 26.6% from 28.5% in January and 29.3% in December.

"Overall, prepayments remain elevated and relatively range bound. While we expect prepayments to remain in the current range for the next several months, further increases in rate could dampen refi activity," the analysts said.