FHA Streamline Refinance Program

streamlineFHA Streamline Refinance Program

(Underwater, negative equity homeowners can also qualify)

The changes are effective June 11, 2012. To qualify your FHA mortgage has a MIP cutoff date of May 31, 2009.This is for the insurance endorsement of an FHA loan, not the origination. Endorsements take several days if not weeks to take place after an origination (endorsement is when FHA insures the mortgage, The endorsement date is on the Case Query screen of FHA connection). According to estimates from CSFB, about two thirds of all FHA-backed 30-year mortgages were originated and endorsed after the cutoff date and therefore wouldn’t be able to benefit from the newly announced reduced premium.

The FHA streamline refinance program has been around for quite a while and is designed to allow borrowers who are current on their loans to “roll-down” their interest rate with little effort. According to the HUD website, the basic requirements are that it must be an existing FHA loan, the mortgage must be current (one time 30-days late, if last three payments made on time), the refinance must result in a lower monthly P&I, and there is no cash back. In the majority of cases government guidelines say that no new appraisal required (the original loan price is used), no new credit review is required, no verification of employment or income is required, and no cash back is allowed. However, know that most lenders, and especially those actually servicing these loans, have overlays in place, meaning the bank adds more requirements to make sure it will be a good peforming loan.

The “Tangible Net Benefit” requirement states that for fixed-to-fixed FHA streamline refinances, a borrower must realize at least a 5% reduction in monthly payments – that’s P&I and the mortgage insurance premium (MIP). In December 2012, the annual charges on loans with terms longer than 15-years were increased by 10 basis points (.1%) to 120-125 basis points which made the Tangible Net Benefit requirement even harder to accomplish. The planned reduction in both the upfront and annual MIP requirements for borrowers that received a loan prior to June 2009 should certainly help. (The upfront premium on eligible loans is .01% and the annual premium is 0.55%.)

In order to qualify for the New Streamlined Refinance your original home loan must be an FHA loan in good standing, endorsed before May 31, 2009 and the refinance must lower your monthly interest payments by 5% or more (of your P & I and MIP). This type of refinancing option reduces your monthly expenses by lowering your payments but there is no option to receive cash back. This works well for people who are in good financial standing with no significant debt because it allows you a little extra money each month that can be put to good use elsewhere.

For streamline refi transactions endorsed by FHA on or before May 31, 2009, the annual MIP will be reduced to .55 percent or half of the current annual fee and the upfront MIP will be lowered to .01 percent. The changes are effective June 11, 2012.

Roughly 2-3 million FHA borrowers are eligible to benefit from these new steps. Credit Suisse analysts estimate that up to 100,000 incremental borrowers should be able to refinance under these improved terms over the next couple of years.

FHA Streamline : No Verification Of Job, Income, Credit

Key Provisions :
1.Employment verification is not required with an FHA Streamline Refinance
2.Income verification is not required with an FHA Streamline Refinance
3.Credit score verification is not required with an FHA Streamline Refinance

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