Q2 Refis Will Reduce Mortgage Payments By $3.4B In Coming Year

f the borrowers who refinanced during the second quarter lowered their annual mortgage interest rate by at least 20%, according to Freddie Mac's quarterly [link=http://freddiemac.com/news/archives/rates/2009/2qupb09.html][u]Refinance Report[/u][/link]. ‘In aggregate, second-quarter refinancers will have about $200 million additional principal paydown after a year than they would have under their old loans,’ says Frank Nothaft, Freddie Mac vice president and chief economist. As long as rates stay near their current levels of 5.25%, Nothaft expects more than half of originations for the rest of the year to be for refinancings. The Freddie Mac report also shows that 62% of prime borrowers who refinanced a conventional, second-lien mortgage either kept the same principal balance or reduced it – up from a revised 57% in the first quarter. The share of refinance loans resulting in new loan amounts that were at least 5% higher than the paid-off second-lien mortgage balances fell to a six-year low of 38% in the second quarter; the first-quarter cash-out share was revised down to 43%. About $25 billion in home equity was cashed out by homeowners when they refinanced in the second quarter, representing an increase of almost $5 billion from the first-quarter volume. ‘[B]ut, importantly, the rise reflects the jump in the number of loans refinanced, rather than an increase in the amount borrowers are cashing out per loan,’ observes Amy Crews Cutts, Freddie Mac deputy chief economist. ‘Credit standards are quite strict today for cash-out refis, and borrowers need a significant equity cushion to contemplate equity extraction. That's why cash-out volumes are 35 percent lower now than a year ago, even though interest rates are so low.’ SOURCE: [link=http://freddiemac.com]Freddie Mac


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