CASH-OUT REFINANCE SHARE STEADY IN FIRST QUARTER

Dollar Volume of Equity Cashed-Out Totals $70.5 Billion

McLean, VA – In the first quarter of 2007, 82 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac' quarterly refinance review. The revised share for the fourth quarter of 2006 was also 82 percent.

"Fixed-rate mortgages averaged 6.2 percent for 30-year product and 6.0 percent for 15-year loans during the first quarter of 2007, well below the current rates offered on home equity loans," said Frank Nothaft, Freddie Mac vice president and chief economist. "Home equity loans are generally indexed to a bank' prime rate, currently averaging 8.25 percent. This interest-rate difference provides a big incentive to borrowers to use cash-out refinance as an alternative to a home equity loans.

"The refinance share of applications averaged 46 percent in the first quarter of 2007, unchanged from 46 percent in the fourth quarter, according to Freddie Mac' Primary Mortgage Market Survey®."

Freddie Mac expects 30-fixed mortgage rates to average between 6.3 and 6.5 percent over 2007 and initial rates on 1-year Treasury-indexed ARMs to hover near 5.5 percent.

In the first quarter of 2007, the median ratio of new-to-old interest rate was 1.02. In other words, one-half of those borrowers who paid off their original loan and took out a new one increased their mortgage coupon rate by 2 percent or more, or roughly three-eighths of a percentage point at today' level of fixed mortgage rates.

"This quarter we saw $70.5 billion cashed out, down from a revised $77.0 billion cashed out in the fourth quarter of 2006," said Amy Crews Cutts, Freddie Mac deputy chief economist. "Cash-out refinance volume is expected to decline over 2007, due to an expected 6 percent reduction in overall mortgage origination activity and a fall in the refinance share of originations to around 44 percent for the year.

"Most borrowers with prime adjustable-rate mortgages (ARMs) that were scheduled for an interest-rate adjustment sometime in 2007 have already refinanced these loans. Freddie Mac estimates that in September 2006, there were about $170 billion in prime ARMs outstanding with scheduled rate resets in 2007. As of March 2007, just over $30 billion of these loans remained active."

The Cash-Out Refinance Report also revealed that properties refinanced during the first quarter of 2007 experienced a median house-price appreciation of 24 percent during the time since the original loan was made, down from a revised 27 percent in the fourth quarter 2006. For loans refinanced in the first quarter of 2007, the median age of the original loan was 3.3 years, unchanged from the median age of loans refinanced during the fourth quarter of 2006.

These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. Transactions are further screened to verify that the latest loan is for refinance rather than for home purchase.The Freddie Mac analysis does not track the use of funds made available from these refinances.

Quarterly Refinance Statistics
	Percentage of Refinances Resulting in:			Descriptive Statistics on Loan Terms and Property Valuation
Quarter	5% Higher Loan Amount¹	Lower Loan Amount	Median Ratio of New to Old Rate²	Median Age of Refinanced Loan (years)	Median Appreciation of Refinanced Property
200001	80%	7%	1.07	5.0	22%
200002	80%	8%	1.10	4.8	24%
200003	81%	8%	1.09	4.6	26%
200004	74%	10%	1.02	3.5	23%
200101	53%	8%	0.87	1.6	12%
200102	60%	9%	0.87	2.5	16%
200103	61%	10%	0.88	2.7	18%
200104	47%	19%	0.84	2.8	14%
200201	61%	10%	0.86	3.4	18%
200202	63%	10%	0.88	3.4	20%
200203	44%	19%	0.84	2.9	13%
200204	40%	22%	0.82	2.4	11%
200301	41%	13%	0.81	1.9	7%
200302	33%	15%	0.79	1.7	3%
200303	34%	17%	0.78	1.7	5%
200304	44%	21%	0.82	2.2	12%
200401	42%	14%	0.82	2.0	6%
200402	43%	14%	0.83	2.0	8%
200403	59%	15%	0.88	2.5	17%
200404	57%	19%	0.88	2.2	16%
200501	64%	10%	0.89	2.4	17%
200502	72%	9%	0.92	2.5	23%
200503	73%	10%	0.93	2.6	24%
200504	81%	8%	0.98	2.9	29%
200601	86%	5%	1.02	3.0	31%
200602	88%	5%	1.08	3.2	34%
200603	88%	5%	1.10	3.3	33%
200604	82%	7%	1.04	3.3	27%
200701	82%	4%	1.02	3.3	24%

Notes:

All values are not seasonally adjusted.

¹Higher loan amount refers to loan amounts that were at least 5 percent greater than the amortized unpaid principal balance (UPB) of the original loan. "Lower loan amount" refers to loan amounts that were less than the amortized UPB of the original loan.

²Ratio of old to new rate refers to the ratio of the interest rate of the refinanced loan to the interest rate of the new loan.

Refinanced loans with adjustable-rate products are excluded.

These data can be found at www.FreddieMac.com/news/finance/. For more information, contact us at chief_economist@freddiemac.com

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.

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