Recently it was announced that changes were coming to the FHA streamline program — and the changes that were announced won’t make it any easier to get an FHA streamline done.

According to the official announcement from HUD, the FHA streamline qualifying rules will change effective November 17, 2009.

Prior to the announcement, the FHA streamline refinance was popular with FHA borrowers because it was a “no income, no asset, no appraisal” refinance option that allowed them to take advantage of lower interest rates without having to completely re-qualify for a new loan.  Recently, many lenders had started requiring a minimum credit score (580, 620, whatever) but prior to the recent announcements, there wasn’t a credit score requirement.

Times have changed and now the FHA streamline program has changed it’s guidelines – to be much stricter.

The new FHA streamline guidelines include things like you have to provide proof of employment and income as well as any cash that will be required at closing.

Oh, and you can’t finance your closing costs into the loan without a complete home appraisal now either.  For anyone living in Arizona who has an FHA loan, this will be a big deal — because many times your home is worth less than what you currently owe on your mortgage.

Maybe we should call it just a regular old FHA refinance… and drop the word “streamline”.

The announcer just stood up and said something to the effect of “Ladies and gentlemen, the FHA streamline program has just left the building.”

Or – at least will leave the building come November 17th.

Related Posts

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• FHA Streamline Refinance: No Longer Easy?
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One of the things that we have been playing with is setting up individual micro-sites that will expand out information about a loan program. One of our recent efforts about the FHA refinance streamline program seems to be getting some traction and people are finding it useful.

How many micro-sites are needed for individual loan programs? I don’t know for sure, but we build them so that there is more information about the loan program, include relevant news information about the program and set it so that it is not targeted towards people only in Arizona (we work in many more states than just Arizona) and try to make it a source of relevant information for people searching on information about this product.

How many people are looking for information about the FHA refinance streamline program? I don’t know for sure, but with interest rates so low, if you are currently in an FHA loan… you probably should be.

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Many people are taking advantage of the FHA streamline refinance program because interest rates are significantly lower than they were when they took out their FHA loan.

When doing an FHA streamline refinance, when can you lock your loan?

Each lender is different, but generally speaking, you must have completed an application and provided the required documentation that you can indeed qualify for an FHA streamline refinance. The application process involves meeting with a loan officer and completing the initial disclosures and typically takes about 30 minutes to an hour.  Sometimes this can be done over the phone – depending on the situation.

For an FHA streamline refinance, how long is my lock good for?

When your loan officer locks your loan for an FHA streamline refinance, typically they will lock it for 30 days. They may also lock it for 15 or 45 or even 60 days – so be sure that you ask them how long they are locking the rate for. Because so many people are trying to do an FHA streamline refinance right now, the lenders turn times are a little slower than normal – so I would recommend locking for *at least* 30 days.

When you lock for an FHA streamline refinance, you are “locked”.

Once your rate is locked for an FHA streamline refinance, your rate is “locked” and won’t move – meaning, it won’t go up or down.  It is also possible to extend the lock as needed for a few days if you need a little more time to get the transaction done — but there is a cost to extend and the cost varies by period and lender.

With an FHA streamline refinance, the lock process can be confusing so be sure to ask your lender about their lock process. Many times, each lender will have a slight variation to the process, so it is in your best interest to ask the question up front and know exactly how the lock process goes.

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I was speaking with someone today about the FHA streamline program and they asked me the following question:

“When I go through the streamline program, do I get to skip a payment?”

To which I replied:

“Technically, you are allowed to defer a payment when you participate in the FHA streamline program, but we officially can’t call it a skipped payment“.

What is the difference between a skipped payment and a deferred payment?

I truly don’t know – but at some point along the way in my mortgage career, someone told me that it wasn’t okay to advertise a skipped payment, but you could call it a deferred payment.

What does this mean?

Simply put… when you participate in the FHA streamline program in order to put yourself in a better financial position, FHA will allow you to defer one months payment.  This means if you close your FHA streamline loan in the month of January, you will defer February’s payment and your first payment will be due on March 1.

Skipped payment, deferred payment — no matter what you call it, it is just one more reason to find out if the FHA streamline program can benefit you by lowering your interest rate and putting yourself in a better financial position.

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Arizona FHA Streamline: Who Qualifies?

The FHA streamline is more popular today than it was a few years ago because of the number of people who currently have an FHA mortgage is higher than it has been in recent years.

And if you are currently in an FHA loan, often times your best financial move when rates drop is to participate in the FHA streamline program.

Can anyone participate in the FHA streamline program? Almost.  There are 3 basic criteria to the FHA streamline that must be met in order for someone to participate.

Criteria to Participate in the FHA Streamline Program

1. You must currently have an FHA loan and live in the property
2. You can’t have more than 2 30 day late payments in the last 12 months
3. FHA won’t let you participate if the FHA streamline program doesn’t improve your overall financial situation (lowers your rate, fixes your adjustable rate, etc.)

Most people that I speak with are eligible for the FHA streamline program and with rates lower than they have been in years, if you currently have an FHA loan, it probably makes sense to find out if you meet the 3 criteria to qualify for the FHA streamline program.

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With the recent drop in rates, more people are starting to ask us about refinancing options within the FHA program.  A couple of the recent questions that we received about the FHA streamline program:

Question:

Earlier this year, I got into the FHA program with an FHA Secure loan.  Can I do an FHA streamline refinance?

Answer:

No. FHA Secure loans are not eligible for the streamline program.

Question:

I am currently in an FHA loan that is adjustable.  My current interest rate is 4.5% but I am afraid that it will go up and want to get into a fixed rate.  Can I do an FHA streamline refinance?

Answer:

Yes.  The guidelines for an “ARM to FIXED” (that is mortgage slang for refinancing from an adjustable rate into a fixed rate) are that the new fixed rate cannot be greater than 2% above your current arm rate.

Other General FHA Streamline Rules:

FHA ARM to FHA ARM

You must have a payment reduction *and* the maximum interest rate of the new loan cannot exceed the possible maximum interest rate of the new loan.

FHA Fixed to FHA ARM

The start rate of the new FHA ARM must be 2% below the current fixed rate.  Since FHA fixed rates are almost the same as FHA ARM rates, this isn’t something that really applies in today’s world.

These are just a few of the simple rules about the FHA streamline program, be sure to stay tuned for more information to come out as people keep inquiring whether or not the FHA streamline program makes sense in their current situation.

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• FHA Streamline Refinance: When Can You Lock Your FHA Streamline Rate?
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Interest rates have fallen over the last week – to the point where if you are currently in an FHA loan, it probably makes sense to call your mortgage professional about the FHA streamline refinancing options.

The FHA streamline program has been around since the early 1980′s and is designed for people who currently have an FHA loan to lower their interest rate without having to completely re-qualify for a new loan.

Here are 5 important things to know about the FHA streamline refinance program:

• If you currently owe more than your house is worth, the FHA streamline program is one of the few refinance options that you have because it is possible to do an FHA streamline without an appraisal.

• If you were to participate in the FHA streamline program in the month of December, your first mortgage payment would be due February 1 – which means that you would effectively defer or “skip” your January mortgage payment.

• When you participate in the FHA streamline program, you will get a refund for whatever is left in your current escrow account — a new escrow account will be fully funded when you set up your new FHA loan.

• When qualifying for an FHA streamline, one important criteria is that you have made your last 12 months mortgage payments on time — although there can sometimes be exceptions made for up to 2 x 30 day late payments.

• When qualifying for an FHA streamline, no income documentation is required.

Is the FHA streamline program right for you? Find out now while interest rates are low… the FHA streamline program only makes sense when interest rates dip and you can take advantage of them before they go back up.

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FHA Hope for Homeowners, FHA Secure, FHA Streamline, FHA 95% Cash-out, FHA 203k Streamline, FHA Short Refinance… these are all “real” options for people who are currently in an FHA loan and looking for FHA refinancing options.

Supposedly.

Some are more real than others.

Let’s start with the “most real” FHA refinance programs and identify who can benefit from them.

FHA Streamline Refinance Program

If you are currently in an FHA loan and have noticed the recent drop in interest rates and just want to lower your monthly payment as a result of getting a lower interest rate – this is the program for you.  The FHA streamline program is designed to allow FHA borrowers to take advantage of lower interest rates without having to completely re-qualify for a new loan.

Highlights of the FHA Streamline program include:

• No appraisal is required on FHA streamline-without-appraisal program
• No income documentation is needed
• No asset documentation is needed
• No credit score required, only a “mortgage rating”

The FHA streamline refinance program is by far the most popular with FHA borrowers when interest rates drop – because it allows them to lower their interest rates with minimal hassle and without having to completely re-qualify for a new loan.

FHA 95% Cash Out Refinance Program

The FHA 95% cash out refinance program is for homeowners who are currently in an FHA loan and want to convert some of the equity in their home into cash for any reason. In mortgage-guy-slang, the process of converting your equity into cash is called “Cash-Out” and it could include paying off credit cards, cars, other miscellaneous debt or simply getting a check at closing.

Some (not all) of the guidelines of the FHA 95% cash out refinance include:

• Full income and asset documentation are required
• Full FHA appraisal is required
• Home must be a primary residence
• Low-mid FICO score of 580 or higher
• Must have lived in the property for the last 12 months

As home equity was rising in past years, the FHA 95% cash out loan was very popular – but going forward, I think it will be more common to see people participate in the FHA Streamline program when refinancing due to declining home values.

FHA 203K Streamline Refinance Program

The FHA 203k Streamline program has gained popularity recently due to the number of foreclosed homes that are being purchased that are in need of repair.  The FHA 203k streamline program can be utilized both as a FHA refinancing option as well as a FHA new home purchase option.

The FHA 203k Streamline is a modification of the standard Section 203k loan in that it only allows limited repairs costing at least $5,000 but not greater than $35,000. The total mortgage amount will allow for acquisition of the property and up to $35,000 in the loan proceeds to be applied toward repair or rehab of the property.

Some of the most common repairs done under the FHA 203k Streamline program include:

• Repair gutters and downspouts
• Repair/upgrade of existing HVAC systems
• Minor repairs of plumbing and electrical systems
• Minor repairs of existing flooring
• Minor remodeling that does not involve structural repairs
• Exterior and interior painting
• New appliances – which may include free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves but may not exceed $2,000
• Improvements for accessibility for people with disabilities

In addition to the FHA 203k streamline program, there is a FHA 203k standard program — which will allow more than $35,000 to be used in repairs but requires more “major” work.

FHA Secure Refinance Program

The FHA Secure mortgage program is where the FHA refinance programs start becoming a little less “real”.

That doesn’t mean that they don’t exist — it just means that many people who try to qualify for this program end up with something different than an FHA secure loan.

The FHA Secure program was announced by President Bush in August of 2007 and according to estimates at the time, hundreds of thousands of families would benefit from the FHA Secure program.

Recently, HUD Secretary Steve Preston recently went on the record to say that FHA has helped more than 325,000 mortgage borrowers refinance during the current crisis.  While that may sound good, the truth is something different:  Yes, there have been hundreds of thousands of FHA refinances.  However, only about 1% of these FHA refinances were with borrowers who had already defaulted.

That would indicate that FHA Secure has only helped a few thousand people, not hundreds of thousands of them.

The FHA Secure program guidelines state that in order to be eligible for the FHA Secure program, you must meet the following criteria:

• Your current loan must be a non-FHA Adjustable Rate Mortgage.
• You must show a sustained history of employment.
• You need sufficient income to make the new mortgage payment.
• You need to show a history of on-time mortgage payments “prior” to the borrower’s ARM loan resetting to the higher rate.
• The Adjustable  interest rate must have either reset or be scheduled to reset between June 2005 and December 2009.
• Mortgage late payments are allowed after the reset date if they are directly related to your higher loan payment.  In addition, if you are in a mortgage payment plan because of late payments and there is sufficient equity in the home, the late payment amounts can be rolled into the new loan.
• Second mortgages are possible under certain specific conditions.
• A minimum of 3% cash or equity in the home.

In my experience, every single person who has inquired of us since this program launch about the FHA Secure program has not ended up with an FHA Secure loan.

FHA Hope for Homeowners Refinance Program

The FHA Hope for Homeowners refinance program was launched by HUD in October of 2008 and is designed to refinance mortgages for eligible borrowers who are having difficulty making their payments, but, after a write-down in principal, can afford a new loan insured by FHA.

Is the FHA Hope for Homeowners program “real”? As we have said before “we think so…” but it has been our experience that people who are interested in the FHA Hope for Homeowners program end up doing an FHA Short Refinance or a Loan Modification with their current lender.

And the current numbers seem to agree with our experience — there have been fewer than 100 applications NATIONWIDE since the programs inception.

FHA Short Refinance

I saved the FHA Short Refinance for last because it isn’t “really” an FHA program.  The concept behind the FHA Short Refinance is that you get your existing lender to write down your current loan balance to 95% of your current market value and accept a short payoff — much like a short sale except for the fact that you get to stay in the home and end up with an FHA loan.

From Arizona Short Refinance expert Paul Dunn:

An FHA Short Refinance is when a home owner refinances a loan where they owe more on their mortgage than their current mortgage is worth. FHA Short Refinance applicants are upside down on their equity, and so they need an FHA Short Refinance. The only way to refinance the home for any reason, is if the current lender takes a “short pay” on the amount owed and writes it off as a loss, thus the FHA Short Refinance. It is basically the same as a short sale with the exception that the home owner keeps their home.

And what happens if the FHA short refinance doesn’t work?  According to Paul:

An FHA Short Refinance is the goal for our work, but it does not work in every situation. In the case where an FHA Short Refinance does not work, you still may be able to negotiate a loan modification with your current lender to improve the terms on your existing mortgage. You may also elect to put your home up for a “short sale” and if you do we can provide you with an excellent Realtor referral in your area who specializes in this type of transaction. If you elect a short sale, it is important to work with a Realtor experienced in the short sale process.

We are very lucky to have one of the mortgage industry’s leading experts on FHA Short Refinances living right here in Arizona.  Paul has been kind enough to teach us a thing or two about getting these FHA Short Refinances done. Thanks Paul!

In Summary

The FHA Streamline, FHA 95% cash out and FHA 203K Streamline programs are very “real”. Most of the people that we talk to who are interested in one of these options end up with one.

The FHA Secure, FHA Hope for Homeowners and programs are less “real”.  This doesn’t mean that they don’t exist — It just has been my experience that most people who are searching for these as a solution end up with either a loan modification from their current lender or attempting to do an FHA Short Refinance or just walk away from their current home.

Related Posts

• FHA Streamline Refinance: Getting Tougher To Do
• Arizona FHA Loans: Home Repairs, Which Ones Are Required?
• FHA Refinance Streamline: More Information
• Arizona FHA 95% Cash Out Rule Changes: Two Appraisals Now Required

One of the benefits of the FHA loan program is that when interest rates dip, you can easily take advantage of lower interest rates without having to completely re-qualify for a new loan.

If you are currently in an FHA loan and your interest rate is over 6%, it currently makes financial sense to speak with your mortgage professional about the FHA Streamline program.

The FHA Streamline program is one of the few loan programs that are available where you can refinance and get a lower the interest rate on your home and:

• No appraisal is required
• No income documentation is needed
• No asset documentation is needed

The main requirements for the FHA Streamline program are that (1.) you have a good “mortgage rating” — meaning that you have made your monthly payments on time and (2.) that if you participate in the Streamline program, it will put you in a better financial situation (read: lower your interest rate).

When speaking with your mortgage professional, ask them about the FHA Streamline With No Appraisal program and what it takes to qualify for it.

You may be surprised at how easy it is to lower your interest rate and save money each month on your mortgage payment.

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• FHA Streamline Refinance: Getting Tougher To Do
• FHA Refinance Streamline: More Information
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