Homeowners Refinance Into Bigger Mortgages

Housing prices may be falling, but that's not stopping consumers from using their homes as piggybanks.

Nearly three-quarters, or 73%, of borrowers with mortgages backed by Fannie Mae (FMR) who refinanced in the first quarter took out bigger loans, cashing out some of the appreciation in the price of their homes.

That was down slightly from the fourth quarter and not far from recent highs. Fannie says cash-out refinancing activity peaked in the second quarter of last year at 82%.

The story is similar at Freddie Mac(FRE), where 82% of borrowers who refinanced in the first quarter increased the size of their mortgages by at least 5%. That figure was unchanged from the fourth quarter of last year.

Freddie says it saw $70.5 billion cashed out in the first quarter, down from a revised $77.0 billion in the fourth quarter of 2006.

Americans continue to pile on debt even as housing prices head south. Earlier this week, the National Association of Realtors said the median price of existing homes sold in the U.S. slipped by 0.3% over the 12 months ended March 31.

The NAR expects median price of a previously occupied home will fall 1.0% this year to $219,800 from the 2006 level.

So why aren't people being more cautious about using their homes as ATMs?