Wednesday, February 2, 2011

Deleveraging and Government cut-backs.

From Calculated Risk:
From Dina ElBoghdady at the WaPo: Low rates prompting more 'cash-in' refinances
In the fourth quarter, 46 percent of borrowers who refinanced their primary mortgages brought cash to settlement to lower the balance on their loans, Freddie Mac said. That's the highest share of so-called "cash-in" refinances since the company started tracking the numbers in 1985.
Some people are doing 'cash in' refis because they have negative equity, others to avoid PMI, and apparently a large number are bringing cash to closing to meet conforming loan limits:
Among them is Amy Rifkind, an attorney who wrote a check for about $70,000 when she refinanced her home ... By doing that, Rifkind and her husband brought down their loan balance below the $417,000 mark and secured a 4.25 percent rate.
The deleveraging is taking money out of the consumer's hands.  It is great for their balance sheet, and very necessary, but added to cuts at the state and local government levels, and potential cuts at the federal level, and we will probably see very minimal growth and very little job creation.

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