More from Freddie Mac

During Q4 2006, 84% of new mortgages that were the result of refinancing were "cash out" loans. This resulted in $70.7 billion in equity pulled out of American homes in a three-month period.

Refinancing itself accounted for 46% of all mortgage loans during the fourth quarter.

A Freddie Mac spokesperson speculated that

"many families found it cost effective to cash-out equity through a new first mortgage, even though it raised their [interest] rate. With the prime rate at 8.25%, a home equity loan or line of credit based on that rate may not make sense if the financing need is large (like a major home improvement or college tuition payments) and will be paid back over several years."

Source: Mortgagenewsdaily.com