McLean, VA \u00e2\u20ac\u201c In the fourth quarter of 2009, 33 percent of borrowers who refinanced their loan lowered their principal balance according to Freddie Mac\u00e2\u20ac\u2122s quarterly Refinance Report. This is the highest \u00e2\u20ac\u0153cash-in\u00e2\u20ac\u009d share since Freddie Mac began tracking the characteristics of refinance transactions in 1985. The next highest share of cash-in refinancing occurred in the fourth quarter of 1993 when 23 percent of borrowers lowered their mortgage debt during refinance.<\/p>\n
Consistent with the cash-in share, the report showed that the share of borrowers who increased their loan balance by 5 percent or more during the fourth quarter was at a record low of 27 percent. The previous lowest cash-out refinance share was 33 percent and occurred during the second quarter of 2003.<\/p>\n
\u00e2\u20ac\u0153Rates on 30-year fixed-rate mortgages set a new record low during the first week in December at 4.71 percent and over the quarter averaged just 4.9 percent in Freddie Mac\u00e2\u20ac\u2122s Primary Mortgage Market Survey\u00c2\u00ae,\u00e2\u20ac\u009d noted Frank Nothaft, Freddie Mac vice president and chief economist. Freddie Mac\u00e2\u20ac\u2122s weekly Primary Mortgage Market Survey\u00c2\u00ae began in 1971. \u00e2\u20ac\u0153One-half of borrowers who refinanced their conventional loan during the quarter lowered their annual mortgage interest rate by at least 0.9 percentage points below the old rate. In aggregate, the lower interest rate translates into about $2 billion in payment savings for these homeowners over the first 12 months of the new loan. For families that paid down their mortgage balances when they refinanced, the monthly payment savings are even greater.<\/p>\n
\u00e2\u20ac\u0153This transformation from a cash-out refi market to a cash-in refi market is consistent with other data we\u00e2\u20ac\u2122ve seen on households reducing their overall debt burdens, particularly revolving credit like credit cards. From September of 2008 to November of 2009, consumers cut $100 billion dollars in revolving debt from their obligations, according to the Federal Reserve Board.\u00e2\u20ac\u009d<\/p>\n
\u00e2\u20ac\u0153In the fourth quarter, about $11 billion in home equity was cashed out by homeowners when they refinanced their conventional prime-credit home mortgage, the smallest quarterly amount in nine years. Over 2009, the total amount of equity cashed out was just under $70 billion, the lowest annual total since 2000, when $26 billion was extracted,\u00e2\u20ac\u009d said Amy Crews Cutts, Freddie Mac deputy chief economist. \u00e2\u20ac\u0153The main causes of the decline in cash-out refinance are declining home prices in many areas of the country that have eliminated equity that could have been extracted and tighter underwriting standards for loan-to-value ratios. Among the refinanced loans in our database, the median appreciation of the collateral property was a negative 2 percent over the median life of the prior loan of 3.6 years.\u00e2\u20ac\u009d<\/p>\n
These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase. The Freddie Mac analysis does not track the use of funds made available from these refinances.<\/p>\n","protected":false},"excerpt":{"rendered":"