by Calculated Risk on 8/14/2006 10:53:00 AM

From Berson's Weekly Commentary: Almost all refinances in the second quarter of 2006 involved equity extraction.

While refinancing activity has been slipping (we estimate that the refinance share of single-family mortgage originations fell to 36 percent in the second quarter from 52 percent in the first quarter), the share is still strong given the generally rising interest rate environment. So if borrowers aren't refinancing to reduce mortgage payments, why are they refinancing? Most are refinancing to take equity out of their homes (a so-called “cash-out refinance”) and an increasing share are refinancing out of adjustable-rate mortgages into fixed-rate mortgages...

The share of refinances involving equity extraction increased to 90 percent in the second quarter of 2006 -- the highest cash-out share recorded since we started keeping track in 1992 (see [graph]). We expect the cash-out share of refinances to increase when refinance activity is sluggish as the incentive to refinance to obtain a lower rate is diminished. We should also not be surprised to see a high cash-out share in a period of unprecedented house price appreciation.

This corroborates the data from Freddie Mac and the BEA; homeowners were still using the Home ATM in Q2.