Freddie Mac just released its quarterly report on cash-out refinancings for 4Q09. No surprise that the percentage of refinances resulting in a 5% higher loan declined to 27% from 36% in the third quarter. This is the lowest percentage going back to 1Q02.
The median age of loans refinanced was 3.6-years, up slightly from 3.5-years reported in both the second and third quarters. The median appreciation of the property was a negative 2% compared with 0% previously.
Freddie Mac"s Chief Economist Frank Nothaft noted that half of borrowers who refinanced lowered their mortgage rate by at least 90 basis points.
At its peak, cash-out refis reached 88% in the second and third quarters of 2006. As the current low percentage suggests, the voluntary component of prepayments is a minor contributor to prepayments at this time.
On the flipside, 33% of borrowers who refinanced their loan lowered their principal balance. Freddie said this was the highest "cash-in" rate since they began tracking this information in 1985.