With the release of several Mortgagee Letters (directions to lenders regarding coming changes) HUD announced detailed changes for Streamlined Refinances.
FHA Streamlined Refinances are loans that are FHA Loans that want to refinance to lower the monthly payment, change the terms (like go from an ARM to a Fixed Rate) or (in the past) go from a 30 year mortgage to a 15 year.
Term reduction refinance transactions (going from 30 to 15yr mortgage) are no longer eligible for streamline documentation and must be underwritten and closed as no cash-out refinances. Here are some of the changes announced that go into effect January 1, 2010:
- At least six months seasoning on the existing FHA mortgage.
- No 30 days late mortgage payments if less than 12 payments have been due. (loan is less than a year old)
- No more than 1 X 30 days late in the last 12 months if the loan is more than 12 months, and NO 30 day late payments in the last 90 days.
- The new mortgage must provide a “net tangible” benefit for the borrower, meaning we must document that it is lowering the monthly payment, or you are refinancing to a 15 year from a 30 year which would reduce the overall cost of having the mortgage.
- When refinancing from a fixed rate to a fixed rate or an ARM to an ARM, the PITI payment must be reduced by five percent or more.
- When refinancing from a fixed rate to an ARM, the new ARM rate must be at least two percent less than the current fixed rate.
- When refinancing from an ARM to a fixed rate, the new fixed rate may not be more than two percent above the current rate of the ARM.
The maximum mortgage calculation has been revised for streamline refinances with and without an appraisal. (click here to see the rules for 2009)
To Calculate the Maximum New Loan, Without an Appraisal: Outstanding principal balance including 30 days interest from the first of the month – UFMIP refund + new UFMIP= Maximum new loan amount
To Calculate the Maximum New Loan WITH an Appraisal: The Maximum loan will be the Lower of the following calculations
Calculation #1 Outstanding principal balance including 30 days interest from the first of the month – UFMIP refund+ closing costs and prepaid items for a new escrow account + new UFMIP= maximum new loan amount (Discount points may not be included in the closing costs)
OR
Calculation #2 97.75% of the appraised value + new UFMIP
Lenders must certify in writing that the borrower is employed and has income at the time of the loan application. (THIS IS NEW!!) In addition, verification of any funds required to close are required. (ALSO NEW!!) A copy of the payoff statement must be included in the case binder. If credit scores are available, they must be entered into the FHA connection. (ALSO VERY NEW and I’m afraid this is going to be bad news for some people)
The maximum CLTV with or without an appraisal is 125%. (For streamlines without an appraisal the CLTV is based on the original mortgage’s value.)
For more details – click here.
If you are considering a refinance of your FHA loan in NC – please call us! We know the details of getting the loan closed – and we have the BEST rates! 8o)) Steve and Eleanor Thorne, 919-649-5057
In your 3rd paragraph, you state that a reduction in term is no longer available for a streamline refi but your 4th bullet point states that it is. Which is correct? I spoke with FHA yesterday and couldn’t get a straight answer and both of our DE underwriters have oposite opinions.
In the FHA mortgagee 2009-32, one of the specific qualifications for the streamline refi is a net tangible benefit which include a reduction in term. My interpretation is that you can do a reduction in term loan WITHOUT an appraisal but you must underwrite the file “like” a normal R/T refi. Meaning – You must full credit qualify the borrower to ensure they can afford the new payment but can avoid the appraisal and use the original value.
You thoughts?
What I said was that you can no longer Streamline to go from a 30 to 15 year term. You can still refinance – and there must be a net tanigible benefit to the borrower, but it is not eligible for a streamline (basically no qualifying) loan. Hope that helps!