The share of refinances that included cashout fell to the lowest level in nearly four years.
Cashouts accounted for 56 percent of refinance loans during the first quarter, Freddie Mac reported today in its quarterly refinance review. Cashout activity fell from a revised 77 percent for the fourth quarter 2007 and 83 percent in the first quarter of last year.
Freddie defines cashout refinances as loans where the new mortgage amount is at least 5 percent higher than the original loan. The survey is based on data from loans owned by Freddie that were refinanced through Freddie
The share of cashouts has not been this low since the second quarter of 2004 when the share was 43 percent.
"A tightening of mortgage underwriting standards throughout the lending industry coupled with declining home values across much of the nation has curtailed the amount of home equity cashed out by homeowners," Freddie Chief Economist Frank Nothaft said in the statement.
The level of first-quarter cashout activity worked out to about $29 billion in proceeds pulled out in home equity, down from a revised $36 billion during the fourth quarter, the report said. Compared to a year earlier, home equity extracted was down around two-thirds.
The government-sponsored housing enterprise cited government data that indicated national aggregate homeowners' equity fell around four percent from the peak of the first quarter through the end of last year.
"As a share of the aggregate value of real estate holdings of households, aggregate equity has fallen below fifty percent for the first time in the 56-year history of the Fed's measurement," Freddie Deputy Chief Economist Amy Crews Cutts stated in the report.
Despite the decline in cashout activity, refinance activity increased during the latest period, Nothaft noted.
Freddie said the median age of first-quarter refinance loans was 2.2 years, down from 3.6 years in the fourth quarter.