Cash-out mortgage refinancings halved - Freddie Mac

NEW YORK, Oct 30 (Reuters) - Homeowners converted $99 billion in home equity to cash by refinancing their properties in the first nine months of 2008, half the amount from the same period of 2007, according to a report on Thursday from Freddie Mac.

The drop in cash-out refinancing is a threat to the economy's growth since the process during the housing boom gave consumers hundreds of billions of dollars of cash to spend.

The U.S. economy last quarter suffered its sharpest contraction in seven years due to spending cuts by consumers and busineses, the government reported on Thursday.

So-called "cash-out" refinancings are also falling on a quarterly basis, with $30 billion extracted from equity in the third quarter versus $40 billion in the second quarter, Freddie Mac said in a statement.

"The combination of declining home values and tighter underwriting standards have reduced the amount of equity that can be extracted by homeowners this year," Frank Nothaft, Freddie Mac chief economist, said in the statement.

The share of refinances with a cash-out component in the year through September was 63 percent, the lowest since 2004.

Freddie Mac found 9 percent of homeowners refinancing last quarter reduced their loan amount, instead of raising the balance as is done in a cash-out. (Reporting by Al Yoon; Editing by Theodore d'Afflisio)