Home equity is the difference in dollars between what the house is worth and what you owe on it. That value nationwide is in the $11-12 trillion range making it a plentiful source of capital.

According to Freddie Mac's quarterly refinance review for the first quarter of 2007, declining home sales and prices have not succeeded in discouraging homeowners from pulling equity out of their homes.

Freddie Mac reported that 82 percent of Freddie Mac-owned loans that were refinanced during the quarter resulted in new loans that were at least five percent larger than the original amount of the previous mortgage. This is the same percentage of cash-out refinances as was reported in the fourth quarter of 2006.

The survey didn't show how homeowners were using the newly acquired cash. The usual uses are home improvements, paying off high interest credit card debt, college expenses, or just to spend fueling the economy.

One thing that is clear however is that homeowners are using mortgage refinancing as a cheaper alternative to HELOC's. Fixed rate mortgages averaged 6.0 to 6.2 percent (depending on the loan term) during the first quarter and, home equity loans are generally indexed to a bank's prime rate, currently averaging 8.25 percent providing a rather good incentive to borrowers to use cash-out refinance as an alternative to a home equity loans.

Interestingly many homeowners who were in a position to do so have refinanced out of prime adjustable rate mortgages (ARM's) that were scheduled for an interest-rate adjustment sometime in 2007. They estimate that only $30 Billion out of 170 billion scheduled for readjustment remained active.