Today's Mortgage Rates

The VA streamline program has been around for years. And for years, one of the benefits of the VA streamline program is that no appraisal has been required.

Up until now.

In the ever-changing world that has become the mortgage industry, some lenders are now requiring that borrowers who want to do a VA streamline refinance now get an appraisal done on their home. Some lenders are requiring a full VA appraisal, some are only requiring a drive-by appraisal… but the important thing is that it is only some lenders who are requiring an appraisal.

For now.

You can reasonably expect that if at least some lenders are now requiring an appraisal to be done on a VA streamline, others will be sure to follow in the not-too-distant-future.

Which means if you are currently in a VA Loan and you owe more than your home is worth (think parts of California, Arizona, Nevada, Florida, etc.) you may suddenly become ineligible for the VA streamline program.

As an example, an announcement by Wells Fargo to all correspondent lenders went out recently and said:

“in an effort to mitigate the risk of declining home values on VA IRRRL transactions on May 18th will require the seller to obtain and deliver a conventional appraisal to Wells Fargo. Please Note: VA has indicated this appraisal should not be submitted to the VA with the guaranty package.”

NOTE: It is not FHA/VA who are starting to require appraisals on VA streamlines, it is specific lenders. This issue is similar to the minimum credit score requirement that many lenders are requiring — it isn’t required in order to get the loan insured, just another lender requirement.

And it makes it more difficult to get a loan if you are a borrower.

From time to time, I am asked “I have a second mortgage. Is it possible to streamline the 2nd mortgage?”

And the answer is “no”.

What this tells me though is that FHA has done a good job of marketing the FHA streamline program because people are starting to ask for it by name.

The FHA streamline refinance program was designed to allow eligible FHA borrowers to take advantage of lower interest rates when they are available without having to completely re-qualify for a new loan – ON THEIR FIRST LOAN ONLY.

When doing an FHA streamline refinance on your first mortgage, if you have a second mortgage, the second mortgage is not eligible for the FHA streamline refinance program. FHA doesn’t insure second mortgages, so your second mortgage is not FHA insured – thus, it is not eligible for the FHA streamline program.

When you participate in the FHA streamline refinance program and you have a second mortgage, the lender of your second mortgage must agree to subordinate the second mortgage – meaning they have to agree to remain in 2nd position while you refinance the first mortgage.

It is getting more difficult to get lenders who are holding second mortgages to allow people to refinance their first with the FHA streamline refinance program, but it is not impossible. Each situation is different – you cannot get an answer on your situation until you speak with the holder of your second mortgage.

Can you streamline your second mortgage?

No.

But you can still participate in the FHA Streamline program if you have a second mortgage…

Reverse mortgages continue to be popular with seniors – the most recent data shows a record 11,261 reverse mortgages were made in March, up from 9,086 in February. The National Reverse Mortgage Lenders Association expects there to be about 150,000 reverse mortgage originations this year, up 30 percent over last year.

The only reverse mortgage program that is available for Seniors is the FHA HECM reverse mortgage program and these loans are being bought by Fannie Mae. Fannie Mae is doing some things where it is trying to attract more money to the reverse mortgage market by increasing the amount of money that reverse mortgage lenders can make on selling the loans by raising fees and allowing the interest rates to change before closing.

But by raising fees and allowing the rates to change right up until closing may be shutting some seniors out of getting a reverse mortgage because it reduces the amount of money a senior homeowner can borrow – and possibly even means that some seniors may not be able to get a reverse mortgage any longer.

Without any warning, last month Fannie Mae made changes that allow for higher margins for reverse mortgage lenders. This means that the spread a lender makes on the loan can now be wider. So, the higher the margin, the higher the interest rate the borrower pays.

Under the new rules, the margin can now be up to 3.75% (it used to be 1.5%) and can change from the time a borrower submits an application and the loan is funded, which can be up to 120 days.

The reason for the move by Fannie Mae is that because they are virtually the only buyer of these loans, they are trying to lure in other investors. Now that they can make more money, Fannie Mae hopes that more investors will step in and buy them.

The only question in my mind is… will there be any seniors who still want to get a reverse mortgage if they become even more expensive than they already are?