Report: 81 Percent of Q2 Refinances Maintained or Reduced Debt

""Freddie Mac"":http://www.freddiemac.com/ released the results of its second quarter refinance analysis Wednesday, revealing that homeowners who refinance continue to strengthen their housing situations.

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Freddie Mac's report showed that 81 percent of homeowners who refinanced their first-lien home mortgage either maintained the same loan amount or lowered their principal balance in the year's second quarter. Of these borrowers, 59 percent maintained about the same loan amount (the highest share ever recorded), while 23 percent reduced their principal balance by paying-in additional money at the closing table.

The median interest rate reduction for a 30-year fixed-rate mortgage was about 1.5 percentage points, translating into interest rate savings of about 28 percent-the largest percent reduction recorded in the GSE's 27 years of analysis.

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The net dollars of home equity converted to cash as part of a refinance (adjusted for consumer-price inflation) also fell, dropping to its lowest level in 17 years. In the second quarter, an estimated $5 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages, a large decrease from the peak volume of $84 billion during Q2 2006.

Freddie Mac VP and chief economist Frank Nothaft attributed the increased refinance volume to enhancements created in HARP 2.0.

""The enhancements to HARP announced in October, such as removing the maximum loan-to-value limit, resulted in additional refinance volume during the second quarter,"" said Nothaft. ""HARP loans were about one-third of Freddie Mac's refinance fundings during the second quarter, the highest share since HARP's inception.""

Property-value change and loan age varied between loans refinanced with HARP and other refinances. The median property value depreciation for HARP-refinanced loans during the second quarter was 34 percent, while the prior loan had a median age of about 5.5 years. Other loans refinanced during the same period had a median property-value decline of 2 percent over a median prior-loan age of about 4 years.