According to Freddie Mac, homeowners pulled out $60.1 billion in equity from their homes during the third quarter, a 26 percent drop from the second quarter.
Freddie Mac anticipates cash-out refinances to become even more seldom, with only $41.4 billion in cash-out expected during the fourth quarter, the lowest level since mid-2004.
“Borrowers we are likely to see refinance will be those with resetting adjustable-rate mortgages and those who have had their homes long enough that recent house price declines are not a serious threat to equity,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
For most of these borrowers, that will translate to rate and term refinances, or those in which cash-out totals are null or merely incidental.
It’s highly unlikely that many borrowers looking to refinance will be able to pull out any cash, especially as a large number of borrowers either put very little down initially or purchased a home when home prices peaked.
A recent decline in home prices along with tighter underwriting guidelines have made it very difficult for homeowners to pull out any equity in their homes, let alone refinance out a resetting adjustable-rate mortgage.
For those that were able to refinance and pull out cash, median data indicated that these homeowners held their initial mortgage since 2003, and experienced house price appreciation of 26 percent.
Quarterly cash-out refinancing peaked at a staggering $83.5 billion in the second quarter of 2006.