Refinancing Loans of Las Vegas Homes Owners

According to the Freddie Mac (OTC: FMCC)
Quarterly Product Transition Report, about 95 percent of refinance loans made
by clients, as well as those for their Las Vegas homes, are accounted by fixed
rate loans in the second quarter of 2011. It is because in spite of the
original loan of refinancing borrowers whether it was an adjustable rate
mortgage (ARM) or a fixed rate, they have a preference on fixed-rate loans and
that is beyond question.

During the second quarter of the year, a
growing number of shares of refinancing borrowers decide on shortening their
loans for their Las Vegas homes. From those refinance borrowers, as well as
those who are owners of Las Vegas homes, who paid off a loan of a 30-year fixed
rate loan, 37 percent of them have a preference on a 15- or 20-year loan. This
is considered the highest share since the third quarter of 2003.

According to Freddie Mac, 55 percent of
refinance borrowers whose loan is a hybrid ARM decided to get new financing into
the same type of product. Since the second quarter of 2004, the share
refinancing from hybrid ARM to the same product which is of course hybrid ARM
also was the greatest.

Frank Nothaft who is the Freddie Mac vice
president and chief economist stated that for 30 – year loans, fixed mortgage
rates average is 46.5 percent  and for
fixed mortgage rates for 15 – year product, the average is 3.84 percent. This
fixed mortgage averages are taken during the second quarter in Freddie Mac’s
Primary Mortgage Market Survey. He also said that the Bureau of Economic
Analysis has estimated the average coupon loans which were about 5.3 percent
during the second quarter of year 2011. This has been the primary reason why it
can’t be questioned that Freddie Mac has strong refinance activity into
fixed-rate loans.

In addition, Nothaft said that, “Compared
to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about
0.8 percentage points lower during the second quarter. For borrowers motivated
to refinance by low fixed-rates, they could obtain even lower rates by shortening
their term. The initial interest rate on a 5/1 hybrid ARM was about 1.2
percentage points lower than on a 30-year fixed-rate loan. For refinance
borrowers who plan to remain in their current home for only a few years, the
hybrid ARM allows for even a greater interest-rate savings.”