Freddie Mac-owned loans saw a decrease in cash-outs during the fourth quarter, the mortgage mammoth announced.
Freddie said 41% of its loans that were refinanced resulted in a new mortgage at least 5% higher in amount than the originals. That's down from 44% during the third quarter and 48% during fourth quarter 2001. For all of 2002, 47% of borrowers who refinanced cashed out at 5% or higher.
"When mortgage rates reach new lows, most families who refinance do so to get a lower mortgage rate and a better loan term. They do not tap into their home equity," said chief economist Frank Nothaft of the decrease.
More than half of all borrowers in the Northeast cashed out, which is more than in any other region in America during the year, he said.
"In the Northeast, families experienced a considerably higher appreciation rate between the dates of the original mortgage and the new refinance mortgage -- 22%," Nothaft said. "This occurred partly because of the very healthy house price growth in the Northeast and also partly because homeowners held the original loan slightly longer on average -- 3.9 years -- than in other areas of the country."
The average loan-to-value ratio on refis continues to hover around 70%, which is allowing borrowers to keep a significant amount of equity, he said.
Freddie also found that the average refinanced mortgage has a rate about 1 1/8 percentage points lower than the original mortgage.
Freddie announced earlier this month that it would restate its earnings upward for 2002, 2001, and possibly 2000 because some parts of its accounting were not consistent with generally accepted accounting principles, or GAAP. The new financials will come out when Freddie's new auditor, PricewaterhouseCoopers, finishes its first full-year audit and re-audit. Pricewaterhouse replaced Arthur Anderson as Freddie's auditor in March.
Freddie is based in McLean, Va., and is a government-sponsored housing enterprise.