FHA announced changes to California Streamline refinance transactions. The FHA issued Mortgagee Letter provides guidance on the changes as well as clarification on existing streamline refinance guidelines.
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Here are the 6 things you need to know about these clarifications and changes:
- Borrower must be current on their mortgage for the month of closing AND the month prior to closing (The payment due the month of closing CAN be included in the payoff).
- Second liens must be subordinated to the new FHA first in their entirety.
- For all case numbers on investment property refinances assigned on or after April 15th, 2011, the borrower must have occupied the subject property for the last 12 months to qualify for maximum streamline financing; if less than 12 months, a full credit-qualifying qualifying regular refinance is required with a maximum LTV of 85%.
- Effective no later than April 15th, 2011, the following net tangible benefit scenarios must exist on all California FHA streamline refinances: A. The total of the new P&I and MI portion of the payment must decrease by at least 5% OR B. Refinancing from an ARM to a fixed product (See chart below).
- Effective no later than April 15th, 2011, lenders no longer have to certify employment and income on FHA streamline refinances.
- Lenders CANNOT add closing costs, discount points, prepaids or other costs to the loan balance on non-credit-qualifying streamline refinances. Lenders CAN add closing costs and prepaids (not discount points) ONLY through a full-credit-qualifying streamline WITH an appraisal.
If you currently have an FHA loan on a house in California, I would be glad to evaluate your options to see if FHA Streamline Refinance may benefit you in reducing your monthly payment.
To read Mortgagee Letter 11-11 in its entirety.