A $500 billion pool of 30-year fixed-rate mortgages, wrapped in the 4% coupon stack on Fannie Mae and Freddie Mac bonds, is no longer available for refinancing due to rising interest rates. A recent report from Deutsche Bank analyst Steven Abrahams finds that 4% pools were falling toward par the past few weeks and trading below par the past few days. Rising interest rates are likely to push more and more mortgages out of refinancing opportunities. "The game for mortgage originators and servicing mangers has suddenly changed," Abrahams writes in Wednesdays outlook report from Deutsche Bank. With the Freddie 30-year rates moving higher on Tuesday to 4.66% from a low of 4.17%, the average incentive for borrowers to refinance dropped nearly 30 basis points to 47 bps. With further rate increases, "these borrowers have almost surely gone out-of-the-money," he said. It represents a missed opportunity for mortgage servicers, resulting in an increased duration on the mortgage-servicing portfolio and the need to sell notes to keep down interest-rate exposure. On the other hand, originators are faced with current refinance application closings, but with lower rate locks. The originators, therefore, will have to sell the mortgages further up at lower than anticipated prices, in cases of inadequate hedging. "The net result," Abrahams concludes, "is a lot of selling of pass-throughs by servicers and originators." Write to Jacob Gaffney.