Cash Out Refis Are Rising Again
Although Freddie Mac is reporting that cash-out figures for the third quarter of 2006 are at the highest level in 16 years and most Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were higher than the original balances, this wave of high refinance activity is at about an end.
In 3Q06, 89% of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This percentage is up from the second quarter of 2006, when the share of refinanced loans that took cash out was a revised 88%, and is the highest since the second quarter of 1990.
Amy Crews Cutts, Freddie Mac's deputy chief economist, said that Freddie Mac expects a slowdown in refinance activity. "In the third quarter, $82.8 billion was cashed out for refinance. And in the fourth quarter we're forecasting $63.4 billion. For 2007, we forecast $49.1 billion in the first quarter, $50.9 billion for the second and $49 billion for the third.
"There's a little bit of seasonality in this, but there are a lot of ARM borrowers out there ... we've got borrowers facing adjustable-rate rests on their loans and a lot of those people have already refinanced."
According to Frank Nothaft, Freddie Mac vice president and chief economist, the rise in refis are mainly a result of the recent proliferation of adjustable-rate mortgages. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com