CORRECTED - UPDATE 1-Cash-out mortgage refinancings halved-Freddie Mac
(Corrects amount in 2nd paragraph to $318 billion) (Adds peak in cash-out refinancings)
NEW YORK, Oct 30 (Reuters) - U.S. homeowners converted $99 billion in home equity to cash by refinancing property loans in the first nine months of 2008, half the amount seen in the same period in 2007, a report on Thursday from Freddie Mac said.
Economists see the drop in "cash-out" refinancing as a threat to economic growth since during the housing boom the process gave consumers hundreds of billions of dollars of cash to spend. At the peak in 2006, homeowners collected $318 billion in cash from home equity, a Freddie Mac spokeswoman said.
The U.S. economy last quarter suffered its sharpest contraction in seven years due to spending cuts by consumers and businesses, the government reported on Thursday.
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, said a statement from Freddie Mac (FRE.P), one of the biggest sources of U.S. home loan financing.
"The combination of declining home values and tighter underwriting standards has 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. It was the largest "cash-in" share in three years. (Reporting by Al Yoon; Editing by James Dalgleish)
