Alex Stenback | Twin Cities Blog on Mortgages, Rates, and Real Estate

UPDATE:  HUD has now published the Mortgagee Letter: The new program will be available for FHA Case Numbers assigned on or after June 11th 2012.  This means eligible borrowers will need to wait about 3 months (and hope that rates remain low) before they can lock in.

Additional fact sheet here.
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Now here’s a refinance program that actually makes some sense.

At 12:15 Central time today, The Obama Administration will announce changes to the FHA’s streamline refinance program.  The broad details are already on the street (at the WSJ, MNI, and soon to be many more outlets) but here are the basics:

Here’s what you need to know about the changes:

- The new fee/cost structure only applies to FHA loans originated prior to June 1st 2009 which are being refinanced through the FHA’s streamline refinance program.

- For eligible loans, the up front FHA premium is being reduced from the current 1% of the loan amount to .01%.

- The monthly FHA insurance premium is being rolled back to .55% of the loan amount per year.  Down  from the current 1.15% (soon to be 1.25%)

- We do not know when exactly these changes will be implemented.  Best guess is within 30-60 days but we await guidance from HUD on this.  Program will be available for FHA case numbers assigned on or after June 11th 2012.

Bottom line:  This is a huge, positive change – it effectively “grandfathers in” the monthly insurance premiums that were in effect before the FHA began ratcheting up these fees two years ago;  and it will open up refinancing to sub 4% rates for many borrowers who to this point have not been able to take advantage of them.

FHA Streamline Refinance Basics:

Being a member of the FHA club confers certain advantages when it comes to refinancing.  The general principal of which is:  FHA already insures your risk, so if you have a solid track record in making the payments on your existing FHA loan, they care a LOT less about the details that often trip-up traditional refinances – the process is as the name suggests:  Streamlined.

Using an FHA Streamline Refinance, you can:

- Refinance with ANY lender – you are not required to refinance with your current mortgage servicer.
- Refinance without documenting income (though mileage will vary, since some lenders will require that you are currently employed.)
- Refinance without an appraisal, or any measure of the property’s current market value.  The original value is used.
- Refinance with a checkered credit history: Credit is reviewed only in context of whether or not you have had any mortgage lates in the last year (though this is another instance where some lenders have set a minimum FICO score, even though the FHA does not.)
- Refinance a home that you have converted to a rental property (even though it was an owner occupied property when you took out the loan.)
- Refinance and leave an existing second mortgage or home equity in place (both loans/lines can be up to 125% of the original value of the property.)

With an FHA streamline refinance you cannot:

- Increase the loan amount to payoff other mortgages or debts.
- Refinance a conventional loan into an FHA streamline.  Conventional-to-FHA refinances require an appraisal, full credit qualifying, and are subject to the current FHA mortgage insurance costs and structure.

Disclaimer: FHA has not released full program guidelines yet – so there may be some important, material details to follow.  Also, if it is not obvious, I am not communicating on behalf of or at the direction of HUD, FHA, or any governmental agency.

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Have questions about an FHA streamline refinance?  Drop me a line or call [952.417.8490] I’ll walk you through your specific options, quote a rate, and generally give you the rundown on how an FHA streamline refinance can reduce your rate, and save a lot of money with very little hassle.

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