The volume of home equity cashed-out during the second quarter was just $38 billion, half the amount reported a year earlier, according to Freddie Mac’s quarterly refinance review.
“During the second quarter about $38 billion in home equity was cashed out through refinance of conventional loans made to prime borrowers, less than one-half the $79 billion cashed out during the same period in 2007,” said Amy Crews Cutts, Freddie Mac deputy chief economist, in a release.
“In total, about $68 billion in home equity was cashed out over the first six months of 2008, the least since the first six months of 2004.”
About two-thirds of the mortgages refinanced during the quarter resulted in loan amounts at least five percent larger than the original mortgage balance, increasing from an upwardly-revised 58 percent share in the first quarter.
But when combined, the first half of 2008 still marked the lowest cash-out share since the autumn/winter period of 2004-2005.
A year ago, 84 percent of refinanced mortgages were considered cash-out, with cash-out refis accounting for 88 percent of all refinance transactions in the second and third quarters of 2008, when home prices were appreciating more than 30 percent.
But now that homes prices have begun to stagnate and fall, many borrowers are finding that it’s difficult to get their hands on a rate and term refinance, let alone any cash out.
“Nine percent of homeowners reduced their loan amount while refinancing during the first half of this year. This is the largest cash-in share since the summer of 2005,” noted Frank Nothaft, Freddie Mac chief economist.