Freddie Mac's Q4 refinance analysis reveals more cash-in buyers than everEighty-five percent of homeowners maintained or reduced their mortgage debt in the fourth quarter of 2011, many by refinancing their mortgages, according to a report released Thursday by Freddie Mac.

Earlier this week, a report issued by NPR and ProPublica accused the government-sponsored entity (GSE) of profiting off underwater homeowners by investing in funds that appreciate when homeowners trapped in high-interest loans are unable to refinance.

Thursday’s report says 85 percent of homeowners who were able to successfully refinance their mortgage maintained about the same loan amount or lowered their principal balance by paying additional money at the closing table, a 26-year high. Of these borrowers, 37 percent maintained about the same loan amount and 49 percent reduced their principal balance.

This latter percentage reflects “cash-in” borrowers and was the highest in the 26 year history of the analysis.

Frank Nothaft, Freddie Mac vice president and chief economist, said: “The typical borrower who refinanced reduced their interest rate by about 1.4 percentage points. On a $200,000 loan, that translates to saving $2,700 in interest during the next 12 months.”

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings,” Nothaft continued. “Fixed-rate mortgage rates hit new lows during December, with 30-year product averaging 3.96 percent and 15-year averaging 3.25 percent that month, according to our Primary Mortgage Market Survey (PMMS).”

Some other notable findings include:

  • “Cash-out” borrowers, those that increased their loan balance by at least five percent, represented 15 percent of all refinance loans. That’s the lowest percentage in 26 years of analysis; the average cash-out share during the 1985 to 2010 period was 46 percent.
  • The net dollars of home equity converted to cash as part of a refinance, adjusted for inflation, was at the lowest level in 16 years (since the third quarter of 1995), according to the report.
  • Of the 10 largest metropolitan areas, the share of “cash-out” borrowers has fallen in all areas, with Detroit and Miami experiencing the largest declines. The “cash-in” share was up sharply in the U.S. and in all 10 large metropolitan areas.
  • Median house values on refinance loans have declined in all 10 areas, with the sharpest decline in Detroit and Miami.

Interest rates dropped even further in the week ending February 2, 2012, according to Freddie Mac’s PMMS released Thursday. Thirty-year fixed-rate mortgages (FRM) averaged 3.87 percent, while 15-year FRM rates averaged 3.14 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) fell to 2.8 percent, while one-year Treasury-indexed ARM rates rose to 2.76 percent.

In response to the report that Freddie Mac is profiting off underwater homeowners, the GSE issued this statement: “Refinancing is Freddie Mac’s bread and butter in today’s marketplace. Refinancing mortgages was more than 78% of our business in 2011 and 80% of our business in 2009 and 2010. In three years we refinanced more than 4.3 million mortgages totaling about $930 billion.”

If you’re a homeowner and have questions about whether you qualify for a loan modification or refinance under the Home Affordable Refinance Program (HARP 2.), contact the Homeowner’s HOPE hotline at 1-888-995-HOPE or go to MakingHomeAffordable.gov.