Are California lenders dumping foreclosed homes onto the market at bargain rates?A new study by Anaheim, Calif.-based Experian, which gathers and analyzes property data, says no. Nima Nattagh, a market analyst for Experian, said the analysis "dispels a misconception about the impact that foreclosed properties in Southern California are being heavily discounted."

While the average discount to market varies from area to area, the average for the southern part of the state is 3.9%, Experian found, and the average property is on the market about six months.

Mr. Nattagh said a computer model was used to establish market values of properties and that extensive testing of the model showed it was accurate within 4.5%. "The model relies on recent sales of similar properties in the area of a given property," Mr. Nattagh said.

The study also showed wide variations in discounts and holding periods among lenders. American Savings, for example, typically gave up only 0.7% to market value in selling foreclosed property, but took a relatively leisurely nine months.

Great Western, at the other extreme, sold its properties 8.1% below market on average but got rid of them in six months, about average for the industry.

Fannie Mae and Freddie Mac, which end up with foreclosed property both as guarantors and as mortgageholders, both performed better than average. Fannie sold its properties in a speedy four months at a 2.6% discount, while Freddie took five months and swallowed a 3.2% discount.

Mr. Nattagh pointed out that the swiftness of sales was an important factor in the total cost of foreclosures. "Over and above the price discount, one also has to take into account uncollected mortgage payments, upkeep and maintenance of the repossessed property, as well as costs associated with the foreclosure sale."

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During a year when interest rates swung erratically, borrowers who refinanced their mortgages consistently chose 30-year fixed-rate loans, according to a compilation by Freddie Mac.

Some 61% of homeowners who had 30-year fixed mortgages refinanced into the same models. Perhaps more significantly, 54% of borrowers with adjustable-rate mortgages refinanced into 30-year fixed, while only 11% went back into ARMs.

Explaining the tendency, Vassilis Lekkas, senior economist at Freddie Mac, said borrowers typically refinanced into fixed-rate loans when rates were relatively low to lock in the favorable rate for an extended period.

The Freddie report noted that interest rates rose from a low of 7.03% in January 1996 to a high of 8.32% in June, then fell to 7.60% in November.

A majority of ARMs holders have refinanced into 30-year fixed in the last two years. In 1992, 1993, and 1994, about 40% of ARMs holders opted for new 30-year fixed models.

Freddie also said 43% of last year's volume of conventional loans were refinancings, up from about 35% in 1995. During the last refi wave, refinancings reached 72% of total volume.

The general expectation by market analysts is that refinancing volume will drop this year to about a quarter of all loans.

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