FHA Streamline Refinance Documentation

We are getting tons of questions on this blog about FHA Streamline Refinances, how long it takes to close a FHA Streamline Refinance, what the FHA Streamline Refinance rates are… you get the picture.

And for the most part, I try to answer them individually.   We are seeing many of the same questions over and over, and we are glad to answer them.

After receiving the this very well thought out question (below) and it’s Waaaaay too long of an answer for just a comment.

Eleanor,

I read above that to do this streamline, there is virtually no verification requirements for income, assets, employment etc… Does that mean I can fill out a loan app, then go to closing? Are there any Lender gotchas? What will you require me to disclose/provide above the FHA minimum requirements to insure the loan?

To clarify, we work for a Bank.  Like most banks, we sell most of our loans to major Servicers (like Chase and GMAC), and we hold the rest in our portfolio, have the mortgage holders make their payments directly to the bank.

FHA sets out guidelines for which loans they are willing to insure.  They set arbitrary dates for some programs, with statements like “Must be Endorsed Prior to June 1, 2009.” in order to avoid the higher FHA PMI.

They set other guidelines that say things like “We don’t need an appraisal, or employment check or credit report.” for the FHA Streamline Refinance Program in 2015.  Those guidelines, again, simply mean that FHA will insure loans that meet those guidelines.

But let’s think about this from the Bank’s perspective… If you originally got your FHA loan with Wells Fargo, they “saw” every document you could scrounge up about your Employer, your Bank deposits, your credit history. They have an appraisal on the home that says at the time they did the deal, the roof was good, it wasn’t in a flood plain – etc., etc.

Now you are applying for a mortgage with OUR Bank.  By the FHA guidelines, we are just supposed to go on FAITH that you can afford this house.  AND, we are not supposed to care that you are “underwater.”

So, in answer to the question, here’s some additional information:

• Employment Verification:  In North Carolina, our STATE predatory lending laws require that we verify that you have a job.  I don’t have to see paystubs, W-2s, etc.  But I must verify that you have a job.  If you are self-employed, I will need to be able to verify that through a Sec. of State Website (for instance).
• Funds on Deposit: If we are doing the calculations correctly, and you will have NO MONEY “out-of-pocket” to pay closing costs etc. for the FHA Streamline Refinance, then we do NOT have to verify bank accounts.  If you ARE paying any closing costs, we WILL need to verify that you have at least enough cash in the bank to cover the estimated costs.
• Credit History:  This is the tricky one… we MUST verify (per the FHA Streamline Refinance Program Guidelines) that you’ve been making your mortgage payments on time.  OUR BANK also requires that you get an AUS Approval.  What’s that?  It’s the “Computer” underwriting that happens on EVERY loan file.  It’s somehow tied (within its own black box formula I’m not allowed to know about) with some credit information… so it’s not pulling a FULL credit report, it’s kind of just “peeking” at your credit (if that makes sense).  If the Automated Underwriting System (AUS) does NOT give you a full approval, we will be required to pull your credit by OUR BANK.  Our experience with OUR Customers so far…  is that if you currently have two credit scores that are over 640, you are Golden.  If you don’t – we are probably going to have to do some work on your credit.
• Second Mortgages:  Must be Subordinated.
• Appraisals:  Not required.

So, in answer to the question, can you just fill out your FHA Streamline Refinance application, agree to the costs calculations, and walk to closing – the answer is no.  Depending on what your circumstances are, we might need some more stuff…

HERE IS THE “Biggest Gotcha’s…” (WE ARE SEEING THIS PROBLEM BIG TIME!) <— Click on the link for more info

If you are in North Carolina, and you are interested in lowering your payments with a FHA Streamline Refinance or you have questions about FHA PMI Rates – call Steve and Eleanor Thorne 919 649 5058.  We would LOVE to give you a FHA Streamline Refinance mortgage rate quote that you can use to compare rates and fees!