The FHA streamline loan program has been popular with borrowers and lenders because it allows them to refinance a FHA loan without having to completely re-qualify for a new loan. For Lender's this meant a quick, easy and profitable transaction. For borrowers, this was a low documentation, no fuss, easy process. For example, it used to not require income verification, asset verification or credit scores.

Well that is about ready to change!! Recently, FHA announced that they were changing the guidelines for the FHA streamline program. While the official date of change is November 17th, expect Lenders to start modifying their program guidelines much sooner.

Highlights of the changes to the FHA streamline program include:

At the time of mortgage 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 and NONE in the last 3 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. if reducing the Term of the mortgage then it must be fully qualified.
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 certified by the lender — or in other words, expect to provide proof of income and the ability to make the payments.

So once again we see lending getting tighter. Obviously the benefit here is better qualified borrowers but it is not going to help those that need the help the most.

A Senior VP from Wells Fargo was holding parties at a foreclosed Malibu California home. Wells Fargo, which received $25 billion in government bailout money last October, was criticized earlier this year for planning events at upscale Las Vegas hotels for top mortgage employees. Now the parties are at a Malibu beach home.

Earlier this week it was noted that the Third Largest FHA lender, Taylor, Bean & Whitaker was abruptly shut down. The day prior their offices were raided by the federal government looking into transactions with its warehouse lender. Both FHA and Freddie Mac suspended purchasing loans from them. Fannie Mae banned them a year of so earlier.
This abrupt closer is going to have some pretty significant ramifications to borrowers. Not just the ones who had loans waiting to be approved or funded by Taylor Bean but to those looking to shop using a Broker.
This is just another example how the once dominant mortgage brokerage operations are being squeezed. As the Third largest originator of FHA loans, which make up a large percentage of current transaction, most of their loans came from brokers. Thus brokers have fewer options now on where to place their loan. As a consumer or broker, with less competition, you will expect mortgage prices to rise. Also with fewer players in the market sorting through loans to approve you will see the borderline loan less likely to get approved as the lenders now have more to choose from.
In fact, we are seeing some lenders raise their FHA minimum credit scores to 640 for all transaction including FHA Streamline Refinances.
Remember, the deal is not done until all the checks have cleared.

Morgage Refinancing or Mortgage Refinancing, which one is it? I can’t tell you how many times I see it spelled “morgage”. Hello people, spell check? It's morTgage.

In any case, both will probably get you on the path to what you want, but which is better, FHA or Conventional? Actually neither is the best. That rest with VA who has the most liberal terms that allow a Veteran to take out up to 100% of the value of their home in cash. Yes, the good old greenback.

As for the other two, Conventional will be more restrictive as you will not get mortgage insurance thus you will be limited to 80% max but more likely a lot of lenders will only go to 75% loan to value and you need a decent credit score not to get walloped on the rate. Below 700 and the adjustments start to get steep for a cash out mortgage refinancing.


This leave FHA, which is somewhere in between VA and Conventional for mortgage refinancing. FHA will lend up to 85% for a cash out refinance. You will have to pay the upfront mortgage insurance as well as the monthly MIP but at least you can get it done. A 620 credit score will get you a good rate as well.

So whether you want a morgage refinance or a mortgage refinance really just amounts to crossing your t.

Today I happen to stumble across a change from one of the MI companies that may become significant. I haven’t seen it from the others but it does not mean other do not have the same policy.

Most Mortgage Insurance companies now require a minimum 680 credit score in order to be eligible for mortgage insurance regardless of what an automated underwriting engine says. What is interesting is the United Guaranty otherwise know as UG has instituted a minimum 720 credit score for any Third Party Originated Loans (TPO), otherwise known as Brokered Loans.

Also, the maximum Debt Ratio on a TPO loan is capped at 41%, again regardless of the automated findings. Banks and directly lenders do not have this restriction.

This is why it is so important to know you credit score prior to applying for any loan. Because I know how important this is, I have arranged for you to get a 7-day FREE trial of 3 Bureau Credit Monitoring! Plus Credit Report & Score so you will be able to fix anything you need, prior to applying for credit.

Unfortunately, this is just another example of another nail being placed in the Mortgage Brokers coffin. Many unsuspecting consumers will get caught in the pinch as well. Most people use Mortgage Brokers to shop for the best rate and terms. By putting in these restrictions to the Broker Community, the MI companies have un-leveled the playing field. Either the Broker will get shut out of certain products or Lenders will raise the prices to consumers because they know they have a captured market. Thus the consumer ends up paying more in the end because there are fewer lending options and when there are fewer options, prices always rise. Get your 7-day FREE trial of 3 Bureau Credit Monitoring! Plus Credit Report & Score today.