FHA Streamline Refinance + Low Rates = Opportunity

FHA Streamline Refinance + Low Rates = Opportunity

What is a FHA Streamline Refinance?

FHA streamline refinances have been around since the early 1980s. What's streamlined is the documentation and underwriting and not the costs, normally.

The basic requirements of a streamline refinance are:

  • Your mortgage must already be FHA-insured.
  • You must be current on that loan's payments.
  • The refinance results in a lower monthly payment for you, or, under certain circumstances, converts your adjustable rate mortgage (ARM) to a fixed-rate mortgage.
  • No cash out from the streamline refinance process.

Owners of FHA mortgage have been refinancing them at a steady clip over here at PennyMac in recent weeks. In fact, nationwide, FHA refinance volume has been at an all-time high, more than doubling week over week. Why? Well, the lowest mortgage rates in history definitely help, but also changes in the FHA Streamline Refinance Program make the idea of refinancing a slam dunk for many borrowers. On June 12, new lower FHA premiums on streamline refinance loans came into effect, allowing many borrowers to lower their mortgage rates without increasing FHA premiums (which had been a sticking point up until now for many).

If you are current on your FHA-insured mortgages closed on May 31, 2009 or earlier, you should take a closer look at the program.

What exactly are these borrowers getting?

FHA is reducing two fees that FHA borrowers typically pay. The Upfront Mortgage Insurance Premium (UFMIP), which was 1% of the loan balance has dropped to just 0.01 percent. FHA is also reducing its annual mortgage insurance premium from 1.15 percent to 0.55 percent.

FHA says that about 3.4 million homeowners in the US meet the criteria above and have a current interest rate of 5% or higher, making them good candidates to refinance.

Other great aspects of the program - it doesn't require verification of your income or an appraisal on your house. This means if you owe more on your mortgage than your home's worth, you're still eligible.

Like the HARP Program, you may be out of luck if you are interested in talking to the big banks. Wells Fargo, Bank of America and JPMorgan Chase are only accepting applications from their existing mortgage The same goes for PHH, the sixth largest lender in the country.