NLIHC study: Renters comprise 45 percent of households whose homes are in foreclosure in four New England states – NMP Skip to main content

NLIHC study: Renters comprise 45 percent of households whose homes are in foreclosure in four New England states

National Mortgage Professional
May 06, 2008

Cash-out refis fall in Q1: Dollar volume of equity cashed-out drops to $29 billionMortgagePress.comFreddie Mac, cash-out refis, Frank Nothaft, quarterly refinance review, Amy Crews Cutts, Flow of Funds Report In the first quarter of 2008, 56 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This was the smallest cash-out refinance percentage since the second quarter of 2004. Further, the share for the fourth quarter of 2007 was revised down to 77 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," noted Frank Nothaft, Freddie Mac vice president and chief economist." "While equity conversion is down, regular refinance activity has stepped up. Fixed mortgage rates reached four-year lows and prompted large volumes of refinancing in the first quarter: More than half of borrowers who refinanced into a fixed-rate mortgage lowered their mortgage rate in the first three months of the year," observed Nothaft. "In contrast, six-out-of-seven refinances had a cash-out component during 2006 and 2007, and borrowers were generally increasing their mortgage rates to get a cash-out refinance. Freddie Mac expects 30-year fixed mortgage rates to average between 5.8 and six percent for prime conventional conforming loans over 2008. In the first quarter of 2008, the median ratio of new-to-old interest rate was 0.90. In other words, one-half of those borrowers who paid off their original loan and took out a new one decreased their first-mortgage coupon rate by ten percent, which translates into a decrease in their coupon rate of just over five-eighths of a percentage point at today's level of 30-year fixed mortgage rates. "During the first quarter about $29 billion in home equity was cashed out through refinance of conventional loans made to prime borrowers, off from a downwardly revised $36 billion cashed out in the fourth quarter of 2007. This is about one-third of the amount cashed out in the same quarter a year earlier," said Amy Crews Cutts, Freddie Mac deputy chief economist. "While research has shown a limited effect in the current quarter of equity conversion into cash, the reduced equity extraction we saw in the first quarter will likely be felt in the consumption and investment decisions of households later on. "The Fed's Flow of Funds report shows that national aggregate homeowners' equity fell just a little over four percent from the first quarter 2007 peak through the end of the year. As a share of the aggregate value of real estate holdings of households, aggregate equity has fallen below 50 percent for the first time in the 56-year history of the Fed's measurement. While in total dollars households still hold a hefty home-equity cushion of over $9.6 trillion, their ability and willingness to tap into it is diminished in the current environment." The Cash-Out Refinance Report also revealed that properties refinanced during the first quarter of 2008 had a median age of 2.2 years for the original loan, compared to 3.6 years in the fourth quarter of 2007. These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase. The Freddie Mac analysis does not track the use of funds made available from these refinances. For more information, visit www.freddiemac.com.
Published
May 06, 2008
Mortgage Industry Will Soon Be ARMed To The Teeth

ARM loans might be a saving grace to borrowers who recently purchased a home, but it comes with risks.

Industry News
May 20, 2022
Battle Between Loan Originators Gets Sparkly and Dirty

Flowers is suing both Durosko and Peevey for these pranks, demanding compensation for their harmful acts, but that doesn’t tell the whole story. 

Industry News
May 18, 2022
FirstClose Receives $35M Investment From Lateral

Fintech says it will use the investment to expand its growing financial services footprint.

Industry News
May 18, 2022
Mortgage News Network Launches Podcast On Helping Underserved Borrowers

'Gated Communities' looks at why homeownership gap is increasing, and what lenders are doing to reverse the trend.

Industry News
May 17, 2022
Class Valuation Appoints EVP Of Valuation Modernization

Cristy Conolly will focus on removing bias from the equation in appraisals.

Industry News
May 17, 2022
Open Mortgage Appoints New Chief Financial Officer

Anthony Nolte, Open Mortgage's CFO since 2019, will transition to chief legal officer.

Industry News
May 17, 2022