Virtually none of the borrowers who refinancedrna traditional one-year adjustable rate mortgage (ARM) chose to replace it withrnanother one, although slightly over a third traded for a hybrid ARM which haverna fixed rate for a period of three, five, seven, or 10 years and then usuallyrnconvert to a loan that adjusts every year. rnForty-two percent of borrowers with a hybrid ARM refinanced into anotherrnhybrid of some type.  About 3 percent of FRMrnborrowers refinanced into hybrids.</p

More borrowers chose shorter term loansrnin Quarter Four.  Forty-three percent ofrnborrowers who refinanced a 30-year FRM chose a 15 or 20 year variety, thernhighest percentage on record, and 77 percent with a 20-year traded it in for arn15 year.  Only about 19 percent ofrnfixed-rate borrowers picked longer-term loans when refinancing.</p

FourthrnQuarter Refinance Transition Figures</p<table class="blogtable" border="1" cellpadding="0" cellspacing="0"<tbody<tr<td valign="top" width="125"

 </p

Old Loan</p</td<td valign="top" width="61"

1-Year ARM</p</td<td valign="top" width="66"

Hybrid ARM</p</td<td valign="top" width="66"

 </p

Balloon</p</td<td valign="top" width="72"

15-Year FRM</p</td<td valign="top" width="66"

20-Year FRM</p</td<td valign="top" width="78"

30-Year FRM</p</td</tr<tr<td valign="top" width="125"

1-Yearrn ARM</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

36%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

43%</p</td<td valign="top" width="66"

14%</p</td<td valign="top" width="78"

7%</p</td</tr<tr<td valign="top" width="125"

Hybridrn ARM</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

42%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

11%</p</td<td valign="top" width="66"

3%</p</td<td valign="top" width="78"

44%</p</td</tr<tr<td valign="top" width="125"

Balloon</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

5%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

28%</p</td<td valign="top" width="66"

13%</p</td<td valign="top" width="78"

55%</p</td</tr<tr<td valign="top" width="125"

15-Yearrn FRM</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

1%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

91%</p</td<td valign="top" width="66"

1%</p</td<td valign="top" width="78"

6%</p</td</tr<tr<td valign="top" width="125"

20-Yearrn FRM</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

1%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

77%</p</td<td valign="top" width="66"

11%</p</td<td valign="top" width="78"

12%</p</td</tr<tr<td valign="top" width="125"

30-Yearrn FRM</p</td<td valign="top" width="61"

0%</p</td<td valign="top" width="66"

1%</p</td<td valign="top" width="66"

0%</p</td<td valign="top" width="72"

27%</p</td<td valign="top" width="66"

16%</p</td<td valign="top" width="78"

56%</p</td</tr</tbody</table

Frank Nothaft, Freddie Mac vicernpresident and chief economist said “Forrnborrowers motivated to refinance by low fixed-rates, they could obtain evenrnlower rates by shortening their term. Compared to a 30-year fixed-rate mortgage,rnthe interest rate on 15-year fixed was about 0.7 percentage points lower duringrnthe fourth quarter.  And for borrowers who plan to remain in their currentrnhome for only a few years, the hybrid ARM allows for even a greaterrninterest-rate savings. The initial interest rate on a 5/1 hybrid ARM was aboutrn1.1 percentage points lower than on a 30-year fixed-rate loan.” </p

Freddie Mac’s transition estimates comernfrom a sample of properties on which it has funded at least two successivernloans and the latest loan is for refinance rather than for home purchase. Somernloan products, such as 1-year ARMs and balloons, are based on a small number ofrntransactions. During the fourth quarter of 2011, the refinance share ofrnapplications averaged 81 percent in and the ARM share of applications was 7rnpercent according to data from Freddie Mac weekly and monthly surveys.

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.