Cash-out refinances rose to the highest level seen since the second quarter of 2009, according to data analyzed by Black Knight Financial Services.
Black Knight found that $22.6 billion in equity was accessed via cash-out refinances. While this is the highest amount tapped since the second quarter of 2009, the figure is still 80% below the all-time high set in the third quarter of 2005.
"Today's cash-out refinance borrowers continue to present a relatively low-risk profile, historically speaking," Black Knight Executive Vice President Ben Graboske said in a news release Monday. "The average credit score of 748 among Q2 2016 cash-out refinance borrowers is 67 points higher than that of the low point recorded in Q3 2006, and is in fact nearly 60 points higher than the overall average credit score from 2005 through 2007."
Altogether, there were roughly 350,000 cash-out refinances during the quarter, representing 42% of all refinances. It was also the ninth consecutive quarter where the number of refinances grew. The amount taken out per borrower — roughly $65,000 — was lower than the first quarter, but still $6,000 higher than a year ago, according to Graboske.
"All in all, it's clear that cash-outs are helping to prop up the refinance market — their 42% share is up from only 30% in early 2015 when interest rates had also dropped," Graboske said.
"What's more, refi volumes are down from 2015 — at least through the second quarter — but while overall they're down 9% from Q1 2015, rate/term refinances are actually down 25% over that same period."
Black Knight also reported that the inventory of loans in active foreclosure has decreased at the faster rate since 2014. Nationally, foreclosure inventories dropped 23% year-over-year.
