Homeowners who refinanced through Freddie Mac in the first quarter of 2012 overwhelmingly picked fixed rate loans and 31 percent chose new loans that would amortize in a shorter period than the old loan. The information came Monday from Freddie Mac's Quarterly Product Transition Report.
The number of borrowers choosing a one-year adjustable rate mortgage (ARM) was statistically zero in both the first quarter of 2012 and the last quarter of 2011. Sixty percent of homeowners who had one-year adjustable picked 15-year fixed rate mortgages (FRM) for their new loan. The shorter term FRM was also extremely popular with borrowers who were refinancing from another 15-year (89 percent, unchanged from the previous quarter) or the slightly longer 20-year (68 percent, down from 73 percent). Only 9 percent of borrowers who were originally in a 15-year moved to a longer-term product.
Borrowers refinancing hybrid ARM loan either stuck with those loans (32 percent) or moved to a 30-year FRM (57 percent.) Borrowers also displayed some brand loyalty; 66 percent chose a loan with the same term as the one they had just paid off
Frank Nothaft, Freddie Mac vice president and chief economist said, "Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about three-quarters of a percentage point lower during the first quarter. For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Further, under the enhanced Home Affordable Refinance Program-HARP-announced by FHFA on October 24, 2011, certain risk-based fees are waived for HARP borrowers who refinance into shorter-term loans."