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Cash-out refis declining
Homeowners focus on payments, terms

Kenneth Harney
San Francisco Chronicle

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The trend is so pronounced, according to mortgage industry analysts, that cash-out refis have just hit their lowest level in decades and perhaps ever. According to giant mortgage investor Freddie Mac, only 32 percent of all refinancings during the third quarter of this year involved cash-outs of money beyond the existing loan balance. That is down from the 60 percent-plus cash- out proportions typical during the height of the refi boom in 2001 and 2002 and the all-time record of 93 percent set in mid-1989.

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Cash-outs were so significant in propping up consumer spending during the recent recession that Federal Reserve Chairman Alan Greenspan called home equity monetization one of the key supports of the national economy.

So what is happening now? Why the apparent cash-out fizzle? Amy Crews Cutts, Freddie Mac deputy chief economist, says that many homeowners have already refinanced once or more during the past few years. They have already pulled out cash and are now focusing on lowering monthly payments or shortening their loan terms.

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