US cash-out refinancing above 15-year high

[TexasLawyer]

Hey, now we know how people "seem to be managing" higher gas costs and inflated prices for food, etc... Oh man, when this thing blows, it's going to be "hugh".


US 1st qtr cash-out refinancing above 15-year high
Tue May 2, 2006 2:58 PM ET

By Julie Haviv

NEW YORK, May 2 (Reuters) - The number of U.S. consumers taking cash out of home equity rose in the first quarter to the highest in more than 15 years, Freddie Mac said on Tuesday.

In that period, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts at least 5 percent higher than the original balances, according to the mortgage finance company's quarterly refinance review.

This is up from a revised 81 percent in the fourth quarter of 2005 and is the highest since the third quarter of 1990, the second-largest U.S. home funding company said.

Despite the first quarter's robust activity, home equity extraction from the refinancing of first-lien, prime, conventional mortgages will fall to about $170 billion in 2006, below the 2005 volume of $244 billion, according to Frank Nothaft, Freddie Mac vice president and chief economist.

<snip>

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-05-02T185850Z_01_N02388750_RTRIDST_0_ECONOMY-MORTGAGES-REFINANCING.XML

[Erika]

1. You can tell the Republican adults are in charge

Once again wrecking our economy and lowering our standard of living.

[Roland99]

2. MEW is fueling the GDP growth. No wonder GDP growth was 4.8%

freakin' morans

[TexasLawyer]

3. Reading between the lines

We know people aren't refinancing to get lower rates:

"With interest rates having risen about a quarter of a percentage point from the fourth quarter to the first quarter, "almost no one is refinancing to reduce their interest rate in today's environment," said Frank Nothaft, Freddie Mac's chief economist."



And it looks like the people doing the refinancings didn't buy their houses 20 years ago. They're the ones who bought recently nearing the top of the bubble:

"Freddie Mac's cash-out refinance survey found that properties refinanced during the first quarter of 2006 experienced a median house-price appreciation of 30% during the time since the original loan was made, up from 29% in the fourth quarter 2005. For loans refinanced in the first quarter of 2006, the median age of the original loan was three years, about one month older than the median age of loans refinanced during the fourth quarter of 2005."


Source:

http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B4630D55F-AFFF-41EF-8230-62365DF8DFB3%7D&keyword=

Homeowners cashing out
Fifteen-year high of 88% of refinancers extract equity

By Steve Kerch, MarketWatch
Last Update: 2:49 PM ET May 2, 2006

CHICAGO (MarketWatch) -- More homeowners turned to mortgage refinancing to extract equity in the first quarter as rising interest rates made other forms of home-equity borrowing more expensive, Freddie Mac said Tuesday.

[TexasLawyer]

4. It also sounds like some of the

cash washing around the economy is housing bubble cash:


Freddie Mac said it expects overall cash-refinancing to pump $170 billion into the economy this year, down substantially from the $244 billion in 2005.

[SoCalDem]

5. When we finally did a re-fi last feb, they tried to get us to take more

We only wanted the under 5% 30 yr re-do on the loan and $30K to do a roof, new HVAC system, conrete work, and kitchen remodel.. They kept sayiong.. You could take $50K MORE for ONLY $.... extra.. We said no thanks.. We have things spiffed up and still have about $300K equity, and a loan we can afford.. even if the market slows, we should be ok in 5 yrs when my husband retires and we blow this popstand :)

[OrangeCountyDemocrat]

6. Don't Forget To Buy GOLD!

You'll need a hedge against those worthless dollars, to put you even farther ahead of those who will be in real trouble come the big crash.

Congratulations on your good decision not to increase your loan, just because they said you could. I can't imagine how many people were brainwashed into borrowing more than they should have, just because the bank used subtle pressure to get them to.

[rucky]

8. Isn't it really really high right now?

too late, no?

:shrug:

[OrangeCountyDemocrat]

12. Too Late? NO!!

Things are going to get a lot worse before they get any better. It's not too late.

[converted_democrat]

13. I know 2 or 3 people that truly believe it will go to 1000.00 an ounce

before the year is over.. Personally, I like silver..

[rucky]

7. If the dollar is sinking, why would they want to take equity...

out of their homes?

unless they absolutely have to?

:shrug:

[TexasLawyer]

9. Other types of home equity loans have gotten expensive

people are pulling money out of retirement and wringing every last dollar out of their house.

One of the scary things is that, when home prices settle back down to earth, people will have an asset that they have negative equity in. There will be an incentive to walk away from their investment, and leave it for the banks to figure out.

This happened big time in Houston (where I live) in the 1980s. There are subdivisions in Houston right now with over 50% of the homes in foreclosure.

[elehhhhna]

14. 50% ? Where in Houston?

[TexasLawyer]

19. There was a big front page

article about it in the Sunday Houston Chronicle, either Easter or the Sunday before. I can't remember the name of the subdivision, but it was a very, very ugly story about overpriced property, buyer representatives not doing their jobs, no-interest loans, etc...


I'll look around for it if I get time.

[TexasLawyer]

20. Emerson Estates

Here's an article-- I could only find the cached version since it's several weks old.

I couldn't find the 50% factoid. The newspaper version of the article had lots of pictures, and so underneath one of the pictures may have been where I saw that statistic.

http://72.14.203.104/search?q=cache:GsUJaUEwl48J:feeds.chron.com/houstonchronicle/business%3Fm%3D4545+houston+chronicle+foreclosure+mobile+home+patel&hl=en&gl=us&ct=clnk&cd=4

[elehhhhna]

15. Another question:

We know a guy who moved out of state last year , bought a house, then took another loan on it and says he's upside down on it now. He's moving back this summer. What happens if he just walks away from that house?

[Horse with no Name]

17. You will see a lot of people just walking away

It happened in the early 80's with the mobile home industry.
When people don't have equity in homes, they don't have loyalty. It's just a place to live for the time being.
They let people in for ridiculous prices and very little money down--and then can turn around and refi, there isn't any incentive to keep that house. Most are refinancing to help with bills--once that money is gone, bills are still there.
Foreclosures will climb to historic proportions.
I do have to say that I am SHOCKED that this evil bunch of bastards haven't made it criminal to have your house foreclosed on.
Coming soon I am sure...when they don't have any loyalty to their equity, they will have a fear of prison.
Personally if I lived in a McMansion and things were starting to spiral, I would cash every cent out and take that money and pay cash for a smaller, affordable home--even if I had to fix it up.
Sure my credit would be screwed--to be sure--but at least my family would have a place to live.

[TexasLawyer]

18. He harms his credit and could be sued by

the bank for failure to abide by his contract to pay. But lenders know they can't "get blood out of a turnip." In the end, we all pay for it.

[converted_democrat]

11. Well, my guess is that they're that desperate.. They're trying to

keep their heads above water, and they have few options left.. Just about everyone I know is in serious economic trouble.. I own my own business, and I'm extremely fiscally conservative, so my friends come to for advice when they're at wits end, and don't know what to do... The "strange" thing is, we all "hang" together, and they're all in dire financial situations, and none of them know that the others are in just as much trouble as they are.. They try to keep it hidden, and go to such lengths to make sure no one else knows.. Each one of them truly thinks they are the only one in the group with serious issues, and truth be told they're all about to lose everything.. It's just so weird to watch from the outside..

[elehhhhna]

16. I hope most borrowers are paying off their cr cards, etc.

We refied 2 yrs ago and took out enough to pay off our 2 Hyundais (the object was reducingn the monthly nut). Good thing, too, since heat & elec have gone up like 30%.

[converted_democrat]

10. People still don't "get it." We are sooo screwed.. Jesus, it just

boggles the mind..

on edit- When the wheels start popping off, it's going to be really bad for everyone.. It hurts my brain to even think about it.. Not only is it going to hurt the people that are currently having problems, it's going to take down many that are currently in good shape.. It's just going to be bad all the way around..