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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (5585)	9/25/2002 1:29:16 PM
From: MulhollandDrive	Read Replies (3) \| Respond to of 306849

In its letter to lenders, Fannie Mae explained that its internal credit-risk research "confirmed that cash-out refinance mortgages default at a higher rate than other refinance transactions." The company said the default rates increased as the borrowers took out substantially larger chunks of equity. For example, the company said, refinance loans in which borrowers increased their loan balance by 20% or more from the prior mortgage balance were three times more likely to default than mortgages with a balance increase of 3% or less. Fannie Mae regularly analyzes the loans it underwrites to determine which are performing well, and occasionally changes underwriting standards to reflect its latest understanding of the market. i think it is an indication that fannie mae is acknowledging the risk level for default is higher once the equity has been extracted. there could unquestionably be a rise in defaults as equity was depleted made much more risky if the property declines in value.