■In the second quarter of 2010, 22 percent of homeowners who refinanced their first-lien home mortgage lowered their principal balance by paying-in additional money at the closing table. This ties the record for the third highest “cash-in” share since Freddie Mac began keeping records on refinancing patterns in 1985. The revised cash-in share in the first quarter was 19 percent.
■“Cash-out” borrowers, those that increased their loan balance by at least 5 percent, represented 27 percent of all refinance loans; the cash-out shares over the last three quarters were the lowest since the analysis began in 1985. The higher cash-in share in combination with low cash-out refinancing activity brought the net dollars of home equity converted to cash to the lowest level in 10 years. In the second quarter, $8.3 billion in home equity was cashed out during the refinance of conventional prime-credit home mortgages vs. $8.4 billion in the first quarter.
■The main causes of the decline in cash-out refinancing were reduced home prices and tighter underwriting standards for loan-to-value ratios. Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative 5 percent over the median prior loan life of 4.0 years.
■The median interest rate reduction was about nine-tenths of a percentage point, or at least 16 percent. Over the first year of the refinance loan life, these borrowers will save over $1,300 in principal and interest payments on a $200,000 loan.
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