Cash-In Refinances Rise in Latest Quarter

July 28, 2010 No Comments »

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During the second quarter, 22 percent of homeowners who refinanced their mortgages lowered their principal balance by bringing in additional money at closing, Freddie Mac reported today.

It was the third highest “cash-in refinance” share since Freddie Mac began keeping records on refinancing trends since 1985.

Cash-in refis (which are basically rate and term refis) increased from 19 percent in the first quarter, but were nowhere near the 36 percent share seen in the final quarter of 2009.

Meanwhile, cash-out refinances, where the original loan amount increased by at least five percent, represented 27 percent of all refinance loans.

Over the past three quarters, cash-out refinancing has been at its lowest since Freddie began tracking in the 80s.

The main cause of decline was harsher underwriting guidelines for loan-to-value ratios, coupled with reduced home prices.

In fact, the median appreciation of the collateral property was a negative five percent over the median prior loan life of four years.

Compare that to 20-30+ percent positive appreciation during the boom years in the mid-2000s, and you’ll know why everyone refinanced their mortgage (with cash-out).

Just $8.3 billion in home equity was pulled out during the second quarter, down from $8.4 billion in the first quarter and the lowest amount since 2000.

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