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Refinance News | Refinance Share Statistics
News about refinancing programs, pricing and production. Stories about the H o m e
Affordable Refinance Program, H A R P 2.0 and other Making Home Affordable coverage.

Quarterly Cashouts Climb

$25 billion Q2 equity extracted from refinance transactions

July 30, 2009

By staff

Despite a decline in the share of refinances involving cashout, U.S. borrowers extracted nearly $5 billion more in equity from their homes through refinance transactions during the latest quarter.

Around $25.3 billion in home equity was extracted by prime borrowers who refinanced conventional mortgages during the second quarter, according to Freddie Mac's quarterly Refinance Report. Cashouts increased from $20.6 billion in the first quarter.

In the second-quarter 2008, however, $38.7 billion was cashed out.

The findings were based on a sample of refinance loans funded by the secondary lender where it had also funded the prior transaction.

Factoring in items such as closing costs and junior-lien payoffs, principal balances on cashout transactions increased by $35.6 billion during the latest period, more than the first quarter's $29.0 billion but less than the second-quarter 2008's $46.0 billion.

The share of refinances that included cashout -- where the newer loan amount exceeded the principal balance of the old loan by 5 percent -- fell to a six-year low of 38 percent. The cashout share was 43 percent in the prior quarter and 67 percent the prior year.

Freddie economist Amy Crews Cutts explained that today's stricter credit standards and lower loan-to-values have weakened cashout share.

Freddie noted that half of second-quarter refinances included an interest-rate reduction of at least 20 percent -- lowering rates by around 1.25 percent and saving borrowers about $3.4 billion over the next year. Frank Nothaft, chief economist for the government-run company, pointed to record-low rates during the period.

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