Massive, massive changes upcoming that will kill the FHA Streamline as we have known it for so many years.
The new rules will make it impossible for most borrowers (my conclusion) to refinance using FHA Streamline.
No doubt, more changes will follow that are not beneficial to borrowers.
But the changes defy the very foundation of the Streamline program. The premise “used to be” why have a borrower requalify for a loan he/she is already paying on time? Since FHA is already insuring the loan against default, might as well let the borrower pay less each month and have a better ability to pay. A logic that seemed reasonable. Such logic has been tossed aside.
Since its beginning, the FHA Streamline has allowed for a refinance to be completed without an appraisal in most cases. At no time has this been more necessary than in today’s market with so many declining home values. Homeowners could refinance with the Streamline program regardless of property value.
No longer. Effective with new applications taken in mid-November 2009, there is a minimum equity requirement. The maximum new loan cannot exceed 97.75% of the property value. A lot of borrowers can say goodbye to refinancing their FHA mortgages for a LONG time.
Need I say? If you have been waiting to refinance using FHA Streamline, do not wait later than NOW. Get in line and get your loan started before the mad rush to beat the deadline. This will be the biggest blow to the mortgage “stimulus” since all the programs were introduced. It’s a hefty step backwards.
Included in the upcoming changes:
- Guidelines as to how much the borrower must save
- Verification of employment and income
- If a new appraisal is not obtained, value used will be the original appraised value – (what a joke)
- Maximum combined value of 125% if home equity loan is outstanding
- If no appraisal is done, cannot include any closing costs in the new loan amount (except UFMIP)
- Higher credit scores (once was no score required at all)
Again, if you can get a lower rate for FHA Streamline now, then you should apply now. Snoozers will probably lose.
I can handle both FHA and VA Streamlines. Reach out to me if I can help. The old rules still apply as of this writing. Changes go into effect November 18, 2009.
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{ 4 comments… read them below or add one }
so if i owe 205000 on one mortgage and 25000 on the other, what’s the calculation to use?
I don’t see why they are making it more difficult now. And fha is a disadvantage then. People with a fannie may loan can refinance over 100% of what they owe. I heard up to 125%.
I hate to raise the ‘this is not fair’ flag, but this is a terrible dichotomy between the 2 programs.
What do you mean when you say verification of assets will be required. Why do we need assets to refinance?
@Cal – Sometimes the borrower must bring a check to closing for the new escrows. If so, we need to show the borrower has the funds in the bank before the closing.