Cash Out Refinancing Hits All Time Low, Cash In Hits High

January 28, 2010 No Comments »

broken atm

The share of refinancing involving cash-out fell to its lowest point since Freddie Mac began analyzing such data back in 1985.

During the fourth quarter of 2009, just 27 percent of borrowers who refinanced increased their loan balance by five percent of more; the previous lowest cash-out refinance share was 33 percent during the second quarter of 2003.

“In the fourth quarter, about $11 billion in home equity was cashed out by homeowners when they refinanced their conventional prime-credit home mortgage, the smallest quarterly amount in nine years,” said Amy Crews Cutts, Freddie Mac deputy chief economist, in a statement.

“Over 2009, the total amount of equity cashed out was just under $70 billion, the lowest annual total since 2000, when $26 billion was extracted.”

Meanwhile, the share of “cash-in” transactions hit an all-time high, with 33 percent of borrowers who refinanced their loan lowering their principal balance.

Of course, this was probably not by choice, and rather a requirement to complete the refinance, as the loan balance likely exceeded the current property value or the maximum loan to value limit.

The median appreciation of the collateral property tied to the refinanced loans was negative two percent over a median life of the prior loan of 3.6 years.

The good news, I suppose, is that homeowners were able to reduce loan balances and obtain lower interest rates, with consumers cutting $100 billion dollars in revolving debt from their obligations between September 2008 and November 2009.

cash-out

(top photo: og2t // ou gee tew tee)

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