About Government Refinance and Home Purchase Programs

If you have an FHA mortgage with a rate at 5.5% or higher we recommend you contact us in the sidebar. Mortgage interest rates are hovering near their historic lows still and people with FHA loans are eligible for a “streamline refinance”. A streamline allows FHA loan holders to reduce their interest rates significantly without having to get an appraisal or even prove income and assets in most cases. Plus closing costs for FHA streamlines are usually paid for by an FHA-approved lender rather than rolled into the new loan.

But FHA streamlines will become more difficult to utilize in mid-April when the FHA is planning to increase mortgage insurance rates across the board for all FHA refinances. So if you have an FHA loan you will probably benefit by starting the refinance process before about April 18th. After that date all FHA refinances will come with higher fees. Contact us about this FHA streamline program in the sidebar.

The FHA announced yesterday that it will be increasing its monthly mortgage insurance fees by 0.25% on all products in April of 2011. This comes on the heels of other recent changes the FHA has made in order to strengthen its financial position in the face of the foreclosure crisis of the last several years.

What does a 0.25% increase in monthly mortgage insurance mean? Well on a $100,000 mortgage that equals an additional $250 per year or about $21 per month. On a $200,000 loan that is $500 per year or $42 per month. And so on. The rate increase also means that if you have an FHA loan now and were hoping to streamline it to a lower rate you should try to get that done immediately because the new, higher FHA mortgage insurance rates will apply to the new loan starting in April and those higher PMI payments could mitigate a lot of the savings that come from lowering the interest rate.

Contact us in the sidebar right away to learn more or get an estimate.

While recent FHA policy changes eliminated some of the benefits of FHA streamline loans, the FHA streamline program is still running and still has some real benefits. Here are some of those benefits:

– FHA streamlines still allow for homeowners who are underwater on their FHA mortgages to refinance to a better rate without requiring an appraisal
– FHA streamlines require more paperwork than they used to but still require significantly less paperwork than traditional refinances

The biggest difference for FHA streamlines going forward is that they will normally require some money at closing because FHA is no longer allowing escrow prepayments, title fees, or bank fees to be rolled into the new FHA loan. Usually the best way to deal with this is to close the FHA streamline loan near the end of the month and to bring the normal mortgage payment due the next month to the closing. So for instance, for an FHA streamline closed in January the borrower would make the normal January payment at the start of the month and then bring the February payment to closing on, say, the 26th of January. With the February payment made the first payment on the new FHA loan would be due in March.

Of course each situation is different and in some cases we as the federally-chartered lender would be able to foot the bill for some of the closing costs.

The primary point is that FHA streamline program is still one of the best programs available for people who already have an FHA loan and would like a lower interest rate. Contact us today in the sidebar if you have an FHA loan at 5.75% or higher and we’ll see if can help you lower your rate and payments.

If you have an FHA loan with a rate at 6% or higher it is now or never to streamline your loan to a rate in the low between 5% and 5.5%. The FHA is pulling the plug on this program Monday November 16th.

Streamlines currently require no appraisal, no income or asset verification, and no money at closing. They allow you to significantly lower your interest rate, skip a month’s mortgage payment, and receive a refund on your current escrow account.

All you need is to qualify is no 30 day late payments on your current FHA loan and a credit score above 620. Contact us in the sidebar now if you fall into that category. If we get your application started by Monday we will be ok.

[2012 Update — The “now or never” talk was hyperbole. It turns out that three years later there has never been a better time to get an FHA streamline. Fill in the form on the right if you have an FHA loan to get more details.]

The FHA released the details on its policy changes regarding FHA streamlines (see mortgagee letter 09-32). The new policies go into effect November 18, 2009. Here are what we consider the most significant changes:

A. Seasoning

At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.

This means there is a minimum 7-9 month waiting period one must wait between FHA streamlines. It used to be that one could get an FHA streamline and if rates improved thereafter get another streamline immediately.

II. Revised Streamline Refinance Transactions WITHOUT an Appraisal

The maximum insurable mortgage cannot exceed:

– The outstanding principal balance minus the applicable refund of the UFMIP,

PLUS

– The new UFMIP that will be charged on the refinance.

This is the most major change. Right now, most FHA streamlines allow a borrower to roll closing costs into the new loan (thus bring no money to closing), skip one month of mortgage payments, and reduce interest rates. With this new rule closing costs will not be able to be rolled into the new loan so as a result it will be much more difficult to get a streamline with no money at closing. The requirement for money at closing will mean many families will not be able to streamline their FHA loan soon.

If you have an FHA loan at 5.75% or higher contact us in the sidebar today. Getting a streamline will be more expensive and difficult starting in November 2009.

As part of the steps the FHA is taking to bolster its cash reserves, it appears that FHA streamlines are about to get harder to qualify for. Right now people with FHA loans can refinance to a better FHA loan without needing an appraisal no matter what their current income is or how upside down they are on the home as long as they have not been 30+ days late on a mortgage payment and have a credit score above 620. According to this report over at Housing Wire the requirements for FHA streamlines will be tightening in significant ways soon:

The new policies revise current procedures to streamline refinance transactions. FHA will establish new requirements for seasoning, payment history, income verification and demonstrate a net tangible benefit to the borrower. The new changes provide for a collection of credit score information when available and caps the maximum loan-to-value (LTV) ratio at 125%.

Also, new guidelines will be provided on ordering appraisals for FHA-insured mortgages and supports the agency’s policy requiring appraiser independence. While FHA’s current policies continue to comply with the Home Valuation Code of Conduct (HVCC), FHA will adopt language from the Code to align with GSE standards.

These changes potentially do away with some major benefits of the FHA streamline process. If you have an FHA loan with a rate of 5.75% or higher contact us today about streamlining to a lower rate while the procedure is still relatively inexpensive and easy. Tell your friends and neighbors with FHA loans as well. FHA streamlines are about to become significantly less streamlined and significantly more expensive and difficult to come by.

FHA mortgages have a few key advantages over conventional mortgages. First among those advantages is the ability to “streamline” an FHA loan. An FHA streamline refinance is basically an low-hassle, low-cost interest rate reduction refinance from one FHA loan to another. In times like these streamlines are especially useful because the borrower does not need to prove income levels or show that the home is still worth more than the loan to get a streamline refinance. So people with FHA loans who have experienced a reduction in in come or who owe more than the home is now worth due to property values dropping can easily refi. However, there are two things that will scuttle a borrower’s ability to get an FHA refi: 1) A 30+ day late mortgage payment in the last 12 months, and 2) a credit score below 620.

HUD says that about 15% of FHA loan holders do indeed have a late payment in the last year so this week the administration announced a loan modification plan for these FHA loan holders who can’t streamline their loans. Here is an excerpt from a recent Seattle PI article on this topic:

U.S. Housing and Urban Development Secretary Shaun Donovan announced Thursday that the Federal Housing Administration was bringing its mortgage modification program in line with the administration’s Making Home Affordable program, creating a new FHA-Home Affordable Modification Program. The agency has released a mortgagee letter and guidelines, and expects all servicers to implement the changes by Aug. 15.

“Today, we’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Donovan said in a news release. “Tens of thousands of FHA borrowers will now be able to modify their mortgages in the same manner as so many others who are taking advantage of the administration’s Making Home Affordable program.”

A mortgage originator out in Indiana wrote a decent summary of FHA streamlines in an article recently. Here is an excerpt:

FHA has permitted streamline refinances on FHA insured mortgages since the early 1980’s. The tremendous feature of the streamline it is a reduced documentation loan with no statement of income or assets.

Some of the basics of a streamline refinance are:
1. The mortgage to be refinanced must already be FHA insured.
2. The mortgage to be refinanced should be current and not over 30 days delinquent more than once in the last year.
3. The benefit of the refinance is to result in lowering your monthly principal and interest payments.
4. No cash may be taken out on mortgages refinanced using the streamline process, however you may receive up to $500.

FHA Streamline can be done in one of two ways

1. Streamline Refinance with an Appraisal:
2. Streamline Refinance without an Appraisal:

Note: The Streamline without the appraisal you (may) be required to bring to closing due to the final calculation from your mortgage pay-off.

If you have an FHA loan with a rate above 6% contact us about streamlining your loan to a better rate.

There was a good article over at Mainstreet.com extolling the virtues of FHA streamline loans. If you have an FHA or VA loan at 6% or higher contact us today to see about streamlining your loan to a lower interest rate while you still can. Here are some excerpts from the article:

Federal Housing Administration (FHA)-insured mortgages have skyrocketed since 2006, and now FHA “streamlined” refinancing programs are following suit.

What’s not to love? FHA loans can be more consumer friendly, don’t require a home appraisal and it does not matter if your home is underwater (meaning the appraised value is less than the amount of money you owe on your mortgage loan).

…

Here are the details. FHA streamlined loans, also known as “rate reduction” loans are designed specifically for one big task; to reduce a homeowner’s monthly mortgage payment. It’s not rocket science but for the most part, it’s flying under the radar, possibly because only FHA mortgage-holders qualify.

But if you do qualify for an FHA streamlined mortgage, the package looks like a good one; maybe the most consumer-friendly and cost-effective refinancing program out there.

While we are waiting to learn more details from the government and from the banks about HOPE loans (aka FHA short refis), it is worth pointing out that one type of loan can currently be refinanced even when the homeowner is upside down, or in other words, even when the homeowner owes more on the home than the current value. This applies if your current loan is an FHA loan.

The program is called FHA Streamlining and here are the requirements for upside down homeowners or any other current FHA loan holder:

– You must have remained on time with your mortgage payments
– The new loan must be at a lower rate than the old loan
– You cannot take any cash out

See here at the HUD site for more info on FHA Streamlines. The beauty of an FHA to FHA Streamline loan is that there is no credit score requirement and no requirement for an appraisal. That is what makes refinancing possible even when home values in any given area have dropped dramatically.

If you owe more than your home is worth and you have an FHA loan currently contact us today and we’ll see about improving your loan terms.

Unpleasant news just came down for FHA borrowers. For a long time the up front FHA mortgage insurance premium had been 1.5%. That meant that for anyone getting an FHA loan they had to pay 1.5% of the loan amount up front in order to offset the risk the FHA was taking to essentially co-sign on the loan. But as foreclosures rose over the last year the FHA found its reserves dwindling quickly. So in recent months the FHA launched a “risk-based” upfront mortgage insurance premium. Under that program borrowers with lower credit scores paid more of a premium up front.

The new housing legislation did away with the risk-based insurance premium plan and mandated that FHA charge the same premium to all borrowers. So in response the FHA recently announced that all FHA loans will now require a 1.75% up front insurance premium payment. See a Reuters article on that here.

How does this play out? Well on a $200,000 loan borrowers with decent credit used to have to pay a 1.5% insurance premium up front, or $3000. With the new standards that same borrower will have to pay 1.75% up front, or $3500. This premium is normally rolled into the new loan amount rather than paid out of pocket by consumers but that extra $500 is still extra debt. While this move probably helps the FHA stay solvent it is still painful for borrowers.