FHA Streamline Refinance .......... Change

The second up coming change that Kim Neilson our Senior Vice President at McCue Mortgage recently made us aware of, are changes to FHA Streamline Refinancing. Unlike the up coming change that I wrote about yesterday, this change will only affect existing FHA Borrowers, but given the number of FHA Loans that have been done over the last few years, this change will still an impact on a significant number of homeowners.

The up coming changes to the FHA Streamline refinance guidelines will become effective with FHA case numbers assigned on or after 11/18/09, and are as follows:

• Borrower must be receiving a net tangible benefit as the result of the streamline refinance in one of the following ways:
  • 5% reduction in total mortgage payment.
  • Adjustable Rate (ARM) to Fixed Rate.
  • Reducing the term of the mortgage
• Evidence borrower is employed and has income at time of application. A current paystub and verbal Verification of Employment (VOE) will be required. If self employed, YTD Profit & Loss (P&L) statement from an accountant will be required.
• If assets are needed to close, borrower must provide evidence of sufficient assets to close.
• If subordinated financing is remaining in place, the max Cumulative Loan To Value (CLTV) is 125%. For streamline refinance WITHOUT appraisal, the LTV/CLTV calculation is based on the original appraised value for the property. For streamline refinances WITH appraisal, the CLTV is based on the new appraised value.
• The Maximum Mortgage Amount calculation is as follows:
  • Streamline WITHOUT appraisal - the outstanding principal balance minus the applicable refund Upfront Mortgage Insurance Premium (UFMIP) PLUS the new UFMIP. Closing costs CANNOT be added to the mortgage.
  • Streamline WITH appraisal - the lower of outstanding principal balance minus the applicable refund UFMIP, plus closing costs, Prepaids and the new UFMIP OR 97.75% of the appraised value plus the new UFMIP. Discount Points* MAY NOT be included in the new mortgage. If the borrower agrees to pay discount points, documentation of sufficient assets must be verified.

*Discount points are defined as total borrower points greater than 1.00.

I will cover the third change tomorrow, which is also an FHA change, and that change will affect all FHA Borrowers.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com