FHA Streamline Refinance Guidelines 2011

For many years, just about the best deal going for real estate borrowers was the FHA streamline refinance. FHA felt that as long as borrowers had been making their payments on time, putting them through the ringer in order to refinance and lower those payments just didnt make sense. However, from 2008 through 2010 as the real estate market collapsed FHA panicked, made a boatload of changes to the program and basically removed many of the streamlined aspects of the program. In 2011, many of the FHA streamline refinance guidelines which had been tightened over the course of the last couple of years have been reversed. FHA has decided that good borrowers who have been making timely payments should once again be able to lower those payments without having to go through increased scrutiny and the process is streamlined once again. Here are the details of the new guidelines:

A perfect 12 month payment history is required.

The purpose of the FHA streamline refinance is to strengthen FHAs position as the insurer of the mortgage. So the prime factor involved in qualifying for the program is that your mortgage payments have been made on time. In order to qualify, your payment must not have been 30 days or more late within the last 12 months. In addition, you must be current at the time of closing your refinance.

No verification of employment or income

One of the changes made over the last few years had been a requirement that the borrowers prove that they had a job. FHA no longer verifies a borrowers employment or income as part of the FHA streamline process. There is no official Verification of Employment, nor are paystubs, W-2s or tax returns required. You can be unemployed and get approved for an FHA streamline refinance as long as you still meet the other guidelines.

No credit score check

FHA no longer requires that credit scores be checked as part of FHA streamline refinance approval. Instead, the concentration is on the payment history as a predictor of future loan performance. This means that credit scores below 620, even below 500 are eligible for streamline refinance. Remember, thought that almost any borrower with low credit scores has probably been 30 days or more late on a mortgage payment in recent months which will still disqualify them from the program.

Waiting period before refinancing

By: Carl Pruitt FHA Guidelines, Updates And Commentary Page 1 of 3

FHA requires that borrowers make 6 mortgage payments on their current FHA insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a streamline refinance.

Loan Balances Cannot Be Increased To Pay Closing Costs

In the past, there was a fairly complicated formula for determining the new loan amount and that loan amount could be raised to cover closing costs. This is no longer the case. Now, the new loan is limited by the payoff amount of the refinanced mortgage (which may include the unpaid principal balance, plus 60 days of interest, which consists of the interest due for the month prior to the closing of the refinancing mortgage plus the interest due for the month in which the closing occurs) less any mortgage insurance refund plus new Upfront MIP. Any other costs must be paid by the borrower at closing or credited by the lender.

No appraisal required
Homes that are under water are still eligible for FHA streamline refinancing. Since FHA already insures the loan, FHAs position is not weakened as long as the mortgage balance stays the same.

The refinance must have a net tangible benefit to the borrower.

FHA is very specific as to what exactly a net tangible benefit consists of.

By: Carl Pruitt

FHA Guidelines, Updates And Commentary

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The effect of FHA mortgage insurance.

FHA does not actually lend the money on what is traditionally referred to as an FHA mortgage. The loan is properly referred to as an FHA insured mortgage. Thus FHA mortgage insurance premiums will still affect your FHA streamline refinance. There are two types of FHA mortgage insurance upfront mortgage insurance and annual mortgage insurance. The FHA upfront mortgage insurance premium is 1% of the loan amount and is usually added to the loan amount at closing. This UFMIP is refundable when you refinance into another FHA loan. The refund is based on the following table:

Annual FHA mortgage insurance is ongoing mortgage insurance payment which is added in to the monthly mortgage payment. It applies to all FHA borrowers, and does not automatically cancel at 80% loan to value, but rather stops at 60 months. As of April 18, 2011, here are the annual mortgage insurance rates: 15-year loan terms, over 90% loan-to-value : 0.505% MIP 15-year loan terms, under 90% loan-to-value : 0.25% MIP 30-year loan terms, over 95% loan-to-value : 1.15% MIP 30-year loan terms, under 95% loan-to-value : 1.10% MIP Further details on the annual FHA mortgage insurance premiums can be found here. For loan officers, complete details are found in HUDs FAQ on ML 2011-11.

By: Carl Pruitt

FHA Guidelines, Updates And Commentary

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