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FHA Streamline Program Changes

Posted on September 27 By Justin McHood

For many years, the FHA streamline program has been popular with people who have an FHA loan because it allows them to refinance their FHA loan without having to completely re-qualify for a new loan. For example, it used to not require income verification, asset verification or credit scores.

But times have changed. Recently, FHA announced that they were changing the guidelines for the FHA streamline program effective November 17th, 2009. Highlights of the changes to the FHA streamline program include:

At the time of application, the person wanting to refinance with the FHA streamline program must have made at least 6 payments since they got their loan.

For people who have had their loan longer than 6 months but less than 12, they cannot have even one 30 day late payment in the preceding 12 months.

For people who have had their loan longer than 12 months, they can have a maximum of one 30 day late payment in the last 12 months.

In order to see if the loan makes sense, a calculation called the Net Tangible Benefit calculation will be done by the Underwriter. The streamline must lower the total PITI ( Principal, Interest,Taxes,and Insurance) by at least 5% when going from a fixed rate to a fixed rate mortgage. If going from an ARM to a Fixed rate, then the interest rate cannot go up by more than 2%. When going from a Fixed rate to an ARM but the new ARM must be at least 2% less than the current rate or reduces the overall total term of the mortgage.

In order to be eligible, the property must be occupied by the borrower: investment properties are not eligible and second homes are not eligible.

All employment, income , and necessary assets now must be verified -- or in other words, it is pretty much just like getting a new loan again.

If you ask me, I don't know if this is a good thing or a bad one -- but I think that it is probably safe to say that the "streamline" word can probably be removed -- and maybe replaced with something similar to "FHA refinance".