FREDDIE MAC SURVEY FINDS FIRST QUARTER 2001 REFINANCED LOANS LESS SEASONED THAN IN PREVIOUS PERIODS

Median Loan Age The Lowest It has Been Since Freddie Mac Started Tracking Age

McLean, VA – Freddie Mac’s quarterly refinance survey found that, in the first quarter of 2001, most of the loans refinanced were initially originated after the last refinancing boom of 1998-1999. The survey also found that the median age of the refinanced loans was only 1.6 years, the lowest it has been since Freddie Mac started tracking the age quarterly in early 1997.

Results of the survey showed that 50 percent of the refinanced loans were for an amount five percent higher than the original mortgages. In contrast, in the first quarter of 2000, when mortgage rates were over 8 percent and refinance volume was much lower, 81 percent of refinancings were at least five percent higher than the existing mortgage loan

“Loans refinanced in this last quarter are much less seasoned than those that were refinanced in 1998-1999. Instead, they are more similar in age to the loans refinanced at the end of the long 1992-1994 refinancing boom,” said Vassilis Lekkas, principal economist for Freddie Mac.

“A key difference between the 1992-1994 refinancing boom and today, however, is that today’s refinancers have had more robust house-price appreciation allowing them to take advantage of the equity in their properties more easily,” added Lekkas.

Freddie Mac’s quarterly review also showed that not only was the median age of the refinanced loan 1.6 years, but that properties backing refinanced loans had also appreciated by 11 percent in value by the time the loan was refinanced.

Growth in the economy slowed to two percent in the first quarter, but the housing sector remains vibrant. Freddie Mac economists continue to see another record year in home sales.

Freddie Mac’s quarterly economic forecast calls for 30-year fixed-rate mortgage rates (FRMs) to remain around seven percent for the rest of the year, and recent rates have hovered very close to that figure. Low mortgage rates allow more homebuyers into the market, many for the first time, and encourage current homeowners to refinance the higher priced mortgage rates of last year into newer, more affordable loans.

“In the first quarter of 2001, refinancings were around 60 percent of the market, compared to the first quarter 2000 when refinancings made up only about 20 percent of the market,” noted Lekkas.

Freddie Mac’s Conventional Home Price Index shows growth in the value of housing, on a national average, to be about 32 percent over the last five years. And Freddie Mac’s economists forecast a continued annualized growth rate of at least five percent for the next year, which will maintain housing as a good investment.

These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans. For the generation of the refinance statistics, transactions are further screened to ensure they are refinances rather than sales. The Freddie Mac survey does not track the use of funds made available from these refinances.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors. Over the years, Freddie Mac has opened the doors for one in six homebuyers and two million renters across America.

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