President Obama recently announced changes in fees charged to FHA-insured borrowers who wish to refinance into another FHA-insured mortgage.  When refinancing to another FHA loan, the term common used is FHA Streamline Refinance.

 

Borrowers with FHA-backed mortgages who use FHA’s streamlined refinancing program are currently charged an up-front mortgage insurance premium of 1 percent of the outstanding loan balance and an additional 1.15 percent as an annual premium.  FHA has reduced the upfront premium (which is financed into the new loan) to 0.01% of the loan size, or 1 basis point for streamlined refinancing of loans originated before June 1, 2009 and cutting the annual mortgage insurance fee to .55 percent.  These reductions will save the typical borrower about $1,000 per year before any savings from reduced interest.

 

The fee reduction will be coupled with a previously announced initiative to “remove the reticence that many lenders have had to provide refinancing to additional families.”  FHA uses a formula called the “Compare Ratio” to assess lender performance.  A lender’s ability to do business with the FHA is dependent on this ratio and up to now streamlined refinances have been part of the calculation.  Because many of the loans refinanced have been of the vintage that has had such a high default rate lenders have been reluctant to offer new loans out of concern over an impact on their ratio.  FHA will now remove those loans from the calculation, hopefully reassuring lenders and opening up the program to more borrowers.

 

Key Points for FHA Streamline Refinance

  • There are NO closing costs added to the new loan

  • Usually you will bring 1 payment or less to closing

  • An appraisal will be required to determine your property value

  • Must have credit score greater than 640 and on-time mortgage payments in the past 6 months with 1×30 in past 12 months

  • We do not verify your income, just your employment

 

Resources

HUD Streamline Your FHA Mortgage

FHA Streamline Loan Requirements

FHA streamline refinance comes with no expense to buyer

Why is the FHA Streamline Refinance So Popular?

FHA ‘streamline refi’ is a breeze for homeowners who qualify

 

www.PlanoMortgageGuy.com

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