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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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Global Economic Intersection
  • Second Quarter Cash-in Refinancing Third Highest on Record at FRE 4 comments
    Aug 1, 2010 10:46 PM | about stocks: XHB

    Michael Gerrity reports at The Real Estate Channel that Freddie Mac (FRE) reported that 22% of mortgage refinancing in the second quarter saw the borrower bring cash to the closing to reduce the outstanding principal.   This percentage was the third highest since FRE started keeping such records in 1985.

    In the same quarter 19% of refinanced mortgages increased the principal (cash out).  Even though the percentage was larger for the cash-in deals, the net for the quarter was $8.3 billion cashed out.  In the first quarter, $8.4 billion of equity was cashed out upon refinancing.

    The Gerrity article doesn't identify the reasons for cash-in deals.  I wonder:  What percentage of these were completed because there was not enough equity remaining in the property to get the lower interest rates available without putting more equity in?

    Disclosure: No positions.

    Stocks: XHB
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Comments (4)
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  • TeresaE
    , contributor
    Comments (3041) | Send Message
    My understanding is that refi's are based on the old 80/20 ratio, same as new mortgages used to be back in the stone ages (like 1992).


    Sooner or later, the number of people with enough cash, liquid assets, or retirement funds, will get scant.


    Refi's are bound to fall again, unless, of course, we bail these out too and give a tax "refi" credit.


    Damn, that is almost plausible in our current era.
    2 Aug 2010, 10:27 AM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
    Just read your StockWatch regarding Naked Capitalism's call on subsidized refi's.


    See? I wasn't totally out on a limb there.
    2 Aug 2010, 12:33 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4052) | Send Message
    Author’s reply » Teresa - - -


    Once you and Yves Smith (Naked Capitalism) pointed it out to me, it became an obvious card that could be played. Unfortunately, it might be "from the bottom of the deck". It would only be of benefit if vigorous economic growth ensued to resolve the affordability crisis that we now have for residential real estate due to low employment and income levels.


    I am having trouble seeing rapid growth scenarios, unless breaking the deflationary pressure we now have by transitioning to high inflation could be mischaracterized as "growth".
    2 Aug 2010, 03:03 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
    Sadly, you made me laugh.


    OF COURSE, hyper-inflation will be portrayed as hyper-growth.


    There are thousands in DC, hoping for such a "reality."
    3 Aug 2010, 10:56 AM Reply Like
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