Loan Information

FHA Streamline Loan Program Changes

Federal Housing Administration (FHA) has implemented significant changes for streamline refinances . These changes will affect all FHA streamline loans across the country and in the northern Virginia area, Vienna, Virginia, Alexandria, VA, Fairfax and the surrounding cities and county’s. These changes take place on all FHA case numbers ordered on Wednesday, November 18, 2009 or later.

The changes are:

1. New seasoning requirements (length of payment)
2. Payment history standards
3. A net tangible benefit test (The loan has to be good for the borrower, imagine that) 
4. Revised remaining equity (Combined Loan To Value requirements)
5. Elimination of the abbreviated loan application
6. Additional certifications and verifications

1. Changes about length of payment history or what we call loan seasoning:

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

2. Payment History. At the time of loan application, the borrower must exhibit an acceptable payment history as described below.

Less than a 12 month payment history, the borrower must have made all mortgage payments within the month due. 

For borrowers that have a 12 month payment history or greater two points must be present: 
    Experienced no more than one 30 day late payment in the preceding 12 months
    Made all mortgage payments within the month due for the three months prior to the date of loan application.

3. Net Tangible Benefit: Basically, no more refinancing to just to refinance a client to generate fees. This is a good thing. It must be determined that there is a net tangible benefit (actual savings to the borrower) as a result of the Streamline Refinance transaction. Net tangible benefit is defined as follows:

Refinancing a fixed rate loan to a to fixed rate loan or ARM (adjustable rate mortgage loan) to ARM: A minimum 5% reduction in the total mortgage payment.

A fixed rate loan to an ARM loan: The new ARM rate must be at least 2% less than the current Fixed rate loan

ARM to Fixed: The new Fixed rate may not be more than 2% above the current ARM rate

Streamline refinancing to ARMs will be restricted on investment properties and second homes.

4: Have a second mortgage or Home Equity Line Of Credit?

All loan amounts can only addup to 25% more than the value of the property. 

5: Elimination of the abbreviated loan application. A complete loan appliction must be taken to include residence, income, and work history.

6. Certifications and Verifications: 

Must include a signed and dated cover letter certifying that the borrower is employed and has income at the time of loan application. This will be followed up with a phone call prior to closing to verify you are still employed.

Assets: If assets are needed to close, the funds must be verified and documented correctly