More than 80 percent of borrowers who refinance their mortgages through Freddie Mac aren't taking cash-out options, according to recent data.
The government-sponsored enterprise released its second quarter data on Aug. 1, showing that 81 percent of homeowners who refinanced their first-lien home mortgage chose to either keep the loan amount constant or lower the principal balance by putting cash down. In the first quarter, 79 percent of borrowers maintained or lowered their mortgage balance.
When comparing the net home equity borrowers have converted to cash through refinancing in Q2 2012 (an estimated $5 billion) to previous figures ($84 billion in Q2 2006), it's clear to see the market has shifted. It should be noted, however, that this dramatic shift in austerity may be partially due to depreciation in property values. The refinanced properties had a median depreciation of 16 percent since the purchase or latest refinance. This left some owners with little to no equity to cash-out.
Borrowers who refinanced to a Home Affordable Refinance Program (HARP) loan suffered higher depreciation than others. The median depreciation for HARP loans was 34 percent.
Frank Nothaft, Freddie Mac vice president and chief economist was recently quoted as saying:
"The enhancements to HARP announced in October, such as removing the maximum loan-to-value limit, resulted in additional refinance volume during the second quarter. HARP loans were about one-third of Freddie Mac's refinance fundings during the second quarter, the highest share since HARP's inception."
In other refinancing news, mortgage applications were up for the week ending November 8, 2012, according to recent data from the Mortgage Bankers Association (MBA.) The percentage of applications attributable to refinancing increased to 81 percent, from 80 percent the previous week.
The overall Market Composite Index increased 12.6 percent on a seasonally adjusted basis. The MBA's Market Composite Index measures mortgage loan application volume and covers 75 percent of all U.S. retail residential mortgage applications. It covers mortgage bankers, commercial banks, and thrifts and has been conducted since 1990.
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