Written By: Joan Ewing, Op-Ed Writer
Hello – There may be a glimmer of light for loan processors and underwriters as FHA rates and conventional rates, as well, continue to drop. The spark of increased could be FHA Streamline Refinances – which is what we will write about today.
For those processors who were not in the business during the last FHA Refinance boom, BE PREPARED you could be in for a landslide of work, let’s discuss the differences in the refinancing.
Streamline refinances are for current homeowners who currently have a FHA-insured mortgage. The borrower can get no cash back except if there are minor adjustments at closing not to exceed $500, if there is a balance of over $500 at closing, the files must be returned and re-underwritten. As a processor, it is important to get all Title Company, broker, lender fees upfront – so there is no delay in closing the loan.
One question that always arises with an FHA Streamline refinance, if you are refinancing with an appraisal is – Do repairs need to be made? The answer is NO as long as they do not involve lead-based paint. In addition, CAIVRS need NOT be checked; however, HUD”S Limited Denial of Participation (LDP) and General Services Administration (GSA) lists do require checks of all borrowers.
What is the difference between a Streamline Refinance WITH and Streamline Refinance WITHOUT an appraisal?
If your borrower is refinancing WITHOUT an appraisal – The new loan amount cannot exceed the amount of the original principal balance to include any UPFRONT Mortgage Insurance Premium plus the new upfront premium.
OR – Add the sum of the existing FHA mortgage, closing costs, reasonable discount points and prepaid expenses and subtract any refund of upfront MIP.
If your borrower would like to Streamline Refinance WITH appraisal – with NO Credit Qualifying. The maximum insurable mortgage is the lower of: LTV is applied to the appraiser’s estimate of value or the current mortgage payoff with closing costs and prepaids.
The maximum LTV of a refinanced FHA Mortgage with No cash out is 97.75% or 98.75%, whichever is applicable to the appraised value.
Non-credit qualifying seems easy, so why would a borrower need to credit qualify for an FHA Refinance.
If there is a change in the mortgage term which will result in an increase in the mortgage payment, a borrower must qualify for the mortgage.
If there is a deletion of borrower(s) from the deed, the remaining borrower must credit qualify. There are exceptions to this, if the person remaining on the mortgage has made 12 payments from his/her own account and can be documented with 12 months cancelled checks – there could be an exception to whether or not the borrower must credit qualify.
FHA does not require an appraisal, termite or credit report on streamline refinances – except of course, if the borrowers are qualifying with an appraisal or there is a change of ownership, due to the persons being removed from the loan.
Mortgage credit underwriting is not required for streamline refinances and it is important that the borrower’s information NOT be entered on the 1003. The information not needed on the 1003 is income, assets, debts and obligations.
Delinquent mortgages are not eligible for streamline refinancing until the loan is brought current.
Subordinate financing may stay in place as long as outstand subordinate lien with remain subordinate to FHA’s new loan. Therefore – it is necessary to get a new subordination agreement from the lender holding the second. As an aside, in this day of tightening money markets, more holders of second mortgages are refusing to re-subordinate, which was unheard of 5 years ago.
There are many other guidelines for Streamline Refinance – therefore I would like to recommend if you have questions – to attend NAMP Training, click on to their website and register, since it will be a Webinar with Live training – all your questions can be answered.
Until next week – keep processing. More later.
About The Author
Joan Ewing - As an op-ed writer and active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base.