Mortgage News Home

Wednesday August 20, 2008

Home Page   26,235 Active Members   Register Welcome, Guest    Sign In  

Home

Latest Headlines

Popular Stories

Bookmark Us

Reader Comments

SUBSCRIBE

SEARCH OUR SITE

RSS News

Mortgage Rates
  30 Yr Fix 6.52% 0.00%
  15 Yr Fix 6.07% -0.03%
  1 Yr ARM 5.18% -0.04%
  5/1 ARM 6.02% -0.03%
  30 Yr Tres 4.44% -0.03%
  Fed Prime 5.00% -0.25%
MND Features

- Wiki
- Video News
- Mortgage License Information
- Real Estate License Information
- Mortgage Content Syndication
- Mortgage Fraud
- Housing Bubble
News Archives

Submit A News Tip
or Story Idea
 

Free Subscription To News Alerts
Stay up to date on breaking news with our free News Alert Service.


Home Equity Still Being Pulled Despite Soft Housing Market

5159 Views - Printer Friendly - Email This Story To A Friend
 
RSS COMMENTS(3) LINK HERE ADD NEWS TO YOUR WEBSITE

Declining home sales and prices have not succeeded in discouraging homeowners from pulling equity out of their homes according to Freddie Mac's quarterly refinance review for the first quarter of 2007.

The corporation reported that 82 percent of Freddie Mac-owned loans that were refinanced during the quarter resulted in new loans that were at least five percent larger than the original amount of the previous mortgage. This is the same percentage of cash-out refinances as was reported in the fourth quarter of 2006.


Because loan volume was down, borrowers actually pulled less money out of their equity than in the last quarter. The total in the first quarter was $70.5 billion compared to 77.0 billion the previous quarter. Amy Crews Cutts, Freddie Mac deputy chief economist said that cash-out refinancing was expected to decline through the remainder of the year due to an expected 6 percent further reduction in overall mortgage activity and a drop in the refinancing share of originations to around 44 percent from the 46 percent that was seen in both the fourth quarter of 2006 and the first quarter of 2007.

The median ratio of new-to-old interest rates was 1.02 which means that half of those borrowers who refinanced with cash out accepted a new loan with a rate that was 2 percent higher than the old loan. With current interest rates for 30-year fixed-rate loans averaging 6.2 percent during the quarter this translated into roughly three-eights of a point increase.

The survey does not track how homeowners planned to use the liberated money; whether they will continue to fuel consumer spending, undertake home improvements or whether they are getting their financial houses in order by paying off equity lines or credit card debt. Freddie Mac vice president and chief economist Frank Nothaft, however, suggested that homeowners are choosing refinancing over home equity lines as a financing mechanism. He said that fixed rate mortgages averaged 6.0 to 6.2 percent (depending on the loan term) during the first quarter and, "Home equity loans are generally indexed to a bank's prime rate, currently averaging 8.25 percent. This interest-rate difference provides a big incentive to borrowers to use cash-out refinance as an alternative to a home equity loans."

Ms. Cutts said that many homeowners who were in a position to do so have refinanced out of prime adjustable rate mortgages (ARMs) that were scheduled for an interest-rate adjustment sometime in 2007. Freddie Mac estimates that in September 2006, there were about $170 billion in prime ARMs outstanding with scheduled rate resets in 2007. As of March 2007, just over $30 billion of these loans remained active.

The report also found that properties refinanced during the first quarter of 2007 had enjoyed a median house-price appreciation of 24 percent during the time since the original loan was made. This was down from a revised 27 percent in the fourth quarter 2006 and 31 percent in the first quarter of 2006. Those loans refinanced during the first quarter had been in place for a median period of 3.3 years.



Story Views: 5159 | Permalink

Story Tools



Email This Story To A Friend

Subscribe To News Alerts
 

Related Tags

Select a Tag for more information related to that Tag. (View All Tags)
 
home equity freddie mac

 

Comments (3)

Post Comment Comments RSS


Reading all of this news and info, I am shocked to see people are still buying homes. What part of wait for better deals they do not understand?

Above Posted By: Bob | Fri, 11 May 2007 12:37:03 EST

So half the people are getting a worse interest rate in order to extract cash from the home ATM? Sounds like survival refi's to pay higher interest rate debts. What have people been doing with the money from their houses? Consuming it- buying gas and groceries, paying property taxes.

Above Posted By: Bill Hoyt | Tue, 8 May 2007 21:43:57 EST

So let me get this straight...the whole world is not going to melt down due to millions of iinocent homeowners losing their house when these arm's come due? imagine that. (sarcasm)

Above Posted By: Anonymous | Tue, 8 May 2007 12:17:35 EST


Post A Comment

Please fill out the form below to submit a comment.

Name: 
(Required - Type Anonymous or Use First Name Only if Private)
Email Address: 
(Not Required So No Fake Emails Please.)
URL or Weblog:
(Leave Blank If You Don't Have One - Use http://)
Comments: 
(Please keep comments on topic. No HTML Allowed. No Advertisng.)
Please Note: Due to Comment Spam, all comments are reviewed by hand. Most comments will appear shortly after submission but it may take up to 12 hours to appear. If you would like to come back, click here to Bookmark the page.
PLEASE DO NOT USE ALL CAPS


Character Count =     (5000 Character Limit)

If you would like to leave a longer comment, please submit your comments in 5000 character increments and we will merge your comments.
Notify me via email when my comment is approved.


Note: Please don't bother spamming. All submissions are reviewed by our our editorial staff. Comment spam and irrelevant links will not be approved.

 




NEW VIDEO
Housings Liar and Ninja Loans
Fannie and Freddie Options Trading


Reader Comments (More)
Let’s face it. It seems that each time the government introduces new laws to combat real estate fraud someone introduces innovat...
Read
OK, so now they are beginning to make progress on the people who need help retaining their homes...beginning, mind you, just begin...
Read
Did any of you read this correctly? Can you believe this was snuck in on a housing bill? "Starting in 2011, merchant banks will be...
Read
Home - Contact - Sitemap - Disclaimer - Privacy Statement - Advertising
All Content Copyright © 2003 - 2008 Brown House Media, Inc. All Rights Reserved.
Reproduction in whole or in part in any form without the express written permission of MortgageNewsDaily.com is prohibited.