JG,

This was also at that link you posted. Basically, 89% of
Refi-loans via Freddie Mac resulted in at least 5% cash out
in Q3/06.

Real Estate Bubble Watch:

November 1 – Dow Jones (Danielle Reed): “Despite higher mortgage rates, homeowners are still choosing to take cash out of their homes when they refinance, housing finance agency Freddie Mac said… In the third quarter of 2006, 89% of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least 5% higher than the original loan balances, Freddie Mac said… That’s up from 88% in the second quarter, and is the highest share since the second quarter of 1990. Cash-out refinancings have increased even as mortgage rates have risen, bucking historical trends, Freddie Mac said…‘Mortgage borrowers continue to refinance their mortgages at a higher frequency than historically would have occurred given the rise in mortgage rates over this year,’ said Frank Nothaft, Freddie Mac vice president and chief economist… One difference in today’s refinance environment, he said, is that there are now large numbers of mortgage borrowers holding hybrid…(ARMs) whose fixed-rate terms are almost over, meaning those ARMs are due to shift to floating rates. This ‘provides borrowers an incentive to refinance into a lower-cost ARM or fixed-rate mortgage,’ Nothaft said… The cash-out refinance report also showed that prices of properties refinanced during the third quarter of 2006 had a median appreciation of 33% from the time the original loan was made…”

If borrowers are converting to fixed rate loans, hat’s off to ’em.

But the fact that properties were apparently appraised at 33% greater values that when the loan was originated is interesting. If the loan originated recently, then maybe the value doesn’t equal reality. What madness this is.

JG (and PS) great posts, as usual.