Fannie Mae purchased $41.4 billion of home mortgages from its seller/servicers in June, its best purchase month of the second quarter, and a sign that originations in the primary market may be on the upswing.

Although the purchase figure looks good compared to most months this year, it is down significantly compared to June 2010 when Fannie bought $60 billion of product form its mortgage banking customers.

Refinancings continue to dominate the application pipeline of mortgage firms, though some are starting to see a noticeable increase of purchase money loans, thanks to low rates and the fact that in some markets it's becoming cheaper to own than rent.

Year to date, the GSE has purchased $306 billion of home mortgages.

At the end of June the GSE's mortgage holdings totaled $731 billion, an 11% decline over the past 12 months.

In other GSE news, Freddie Mac reported that consumers who refinance are continuing to pay down their loans, at least in part, hoping to save thousands of dollars over the long haul.

According to new figures compiled by Freddie Mac, 77% of consumers who refinanced in the second quarter either kept their loan balance the same, or reduced it. In the first quarter the ratio was 75%.

Roughly 26% of mortgagors engaged in a 'cash-in' refi by bringing more money to the closing table in an effort to reduce principal. In 1Q11, 21% of consumers engaged in cash-in transactions.

“This is primarily a 'rate-and-term' market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term,” said Freddie Mac Chief Economist Frank Nothaft.

Cash-out refis accounted for just 23% of the market, compared to 46% from 1985 to 2010.

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