LOAN REFINANCINGS THAT TOOK EQUITY OUT OF HOUSING ROSE IN SECOND QUARTER OF 2001

Quarterly Survey says Refinanced Loans Were Older Than In First Quarter

McLean, VA - Freddie Mac today reported that 57 percent of loans that were refinanced during the second quarter of 2001 took five percent or more of the equity out of their homes, compared to 52 percent in the previous quarter. The findings were released as part of Freddie Mac’s quarterly refinance study.

Affordable mortgage rates that were responsible for creating a refi boom earlier in the year have dropped even lower recently, making conditions ripe for yet another spate of refinancing.

“We are once again seeing an uptick in refinancings,” said Vassilis Lekkas, principal economist for Freddie Mac. “When mortgage rates are low, homeowners have an incentive to refinance for that lower rate. Many borrowers find they can also tap into their equity while not raising substantially the cost of their monthly payments, making it seem even more desirable to refinance.”

A year ago at this time, 81 percent of refinanced loans also took equity out of the homes. However, mortgage rates were higher and the volume of loans being refinanced last year was significantly lower than today.

Freddie Mac’s quarterly review also found that the median age of the refinanced loans was 2.6 years, versus 1.6 years last quarter, and 6.4 years in the second quarter of 2000.

According to the results of the review, the refinanced property appreciated an average of 15 percent over the average 2.6 years that the original loan existed.

And although overall economic growth continued to slow in the second quarter, housing remained a bright spot. Freddie Mac economists are still cautiously confident that 2001 will be another record year in home sales.

“In spite of the slowing economy, the housing sector remains robust going into the Autumn of the year,” noted Lekkas. “We expect, however, that housing will start to slow soon, but activity will ease only to levels that are considered more normal.”

Freddie Mac’s Conventional Home Price Index shows growth in the value of housing, on a national average, to be about 36 percent over the last five years. And Freddie Mac’s economists forecast a continued annualized growth rate of at least four percent to five percent for the next year, maintaining 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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